FINRA Series 63 – Uniform Securities Agent State Law — Question 2

An agent working for a broker-dealer mistakenly sends an investment adviser some bonds that the adviser purchased on behalf of his client instead of directing the bonds to the financial institution that is serving as the qualified custodian of the client's funds.
If the investment adviser wants to avoid being considered custodian of this client's account, what must the adviser do?

Answer options

• A. Record what securities were sent, when he received them, and when he forwarded them--which
• B. Record what securities were sent, when he received them, and when he forwarded them--which must be within three business days-to his client.
• C. Record what securities were sent, when he received them, and when he forwarded them--which must be within twenty-four hours-to his client.
• D. Record what securities were sent, when he received them, and when he forwarded them--which must be within twenty-four hours-to the qualified custodian of the client's funds.

Correct answer: C

Explanation

The correct answer is C because the investment adviser must act promptly and inform the client within twenty-four hours to avoid being considered the custodian. Options A, B, and D are incorrect as they do not meet the requirement for the time frame or the party to whom the information must be conveyed.