Page 35 - P&P11-05-2020-with-FAQ-JR

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Handling of Customer Funds – Custody Issues

Definition
An adviser has custody if it holds, directly or indirectly, client funds or securities, or has any authority to obtain
possession of them. An adviser would also have custody if a related person holds, directly or indirectly, client funds
or securities, or had any authority to obtain possession of them in connection with advisory services provided to
clients. Custody generally includes:
● Having possession of client funds or securities unless the adviser returns them to the client within three
days;
● Any arrangement under which the adviser is authorized or permitted to withdraw client funds or
securities based on its instructions, including but not limited to direct fee deduction and certain
arrangements under a standing letter of authorization or other disbursement authority; or
● Any capacity that gives the adviser legal ownership or access to client funds or securities such as serving
as general partner/managing member for a fund managed by the adviser or serving as trustee for an
advisory client

Policy
CIS will not have physical custody of any client funds or securities. CIS will maintain client assets with a qualified
custodian. CIS may have other forms of custody as defined by the appropriate rule. The CCO will determine
whether or not the firm has custody and will ensure compliance with relevant custody rules including disclosure of
custody on form ADV.

CIS currently has the following form(s) of custody: [direct fee deduction, custody due to SLOA]

Direct Fee Deduction
When CIS deducts advisory fees directly from client accounts, the following additional steps will be taken:
● Client will provide written authorization permitting the fees to be deducted from his or her account;
● CIS will maintain client assets at a qualified custodian and ensure that the custodian segregates and
identifies each client’s securities;
● CIS will notify the client in writing of the custodian’s name, address, and the manner in which the client
assets are maintained;
● CIS will make a reasonable effort to ensure that the qualified custodian being used will deliver quarterly
account statements to the client showing transactions for that time period;
● When required by rule, CIS will send an itemized invoice to the client showing the formula used to
calculate the fee, the amount of assets under management the fee is based on, and the time period
covered by the fee.

The CCO will periodically review and test the management fee calculations to ensure they are accurate based on
the advisory contract.]

Disbursement Authority
Certain clients of CIS may grant CIS standing authority to make disbursements to third parties from the client’s
account at a qualified custodian. In these cases, the firm will be deemed to have custody of client assets. The RIA
will only enter into such an arrangement under the following conditions:
1. The client provides an instruction to the qualified custodian, in writing, that includes the client’s signature,
the third party’s name, and either the third party’s address or the third party’s account number at a
custodian to which the transfer should be directed.
2. The client authorizes the investment advisor, in writing, either on the qualified custodian’s form or
separately, to direct transfers to the third party either on a specified schedule or from time to time.
3. The client’s qualified custodian performs appropriate verification of the instruction, such as a signature
review or other method to verify the client’s authorization, and provides a transfer of funds notice to the
client promptly after each transfer.
4. The client has the ability to terminate or change the instruction to the client’s qualified custodian.