The SEC Staff had observed failures by investment advisers to realize that they were deemed to have custody in the following 5 circumstances:

  1. The adviser’s personnel or a related person serve as trustee or have been granted power of attorney for client accounts.
  2. The adviser (a) provides bill-paying services for clients and, therefore, is authorized to withdraw funds or securities from the client’s account; (b) manages portfolios by directly accessing online accounts using clients’ personal usernames and passwords without restrictions and, therefore, has the ability to withdraw funds and securities from the clients’ accounts; or (c) has signatory and check writing authority for client accounts.
  3. The adviser received checks made out to clients and failed to return them promptly to the sender.
  4. The adviser or one of its affiliates serves as the general partner of a limited partnership or holds a comparable position for a different type of pooled investment vehicle (such as by serving as the manager or managing member of a limited liability company or as the trustee of a business trust).
  5. The adviser has physical possession of client assets, such as securities certificates.