Applicant questions
- - Can the firm hold, move, instruct, deduct from, or otherwise control client assets?
- - Are assets held by the firm, custodian, broker, fund vehicle, platform, or client directly?
- - What disclosures, reconciliations, audits, and segregation controls apply?
Why regulators ask
- - Client asset evidence is central to investor protection and operational risk.
- - Custody or control can change capital, audit, disclosure, policy, and permission requirements.
- - Firms often underestimate custody because they do not hold assets directly but still control movements.
What good looks like
- - Money and asset flows are drawn from client onboarding through exit.
- - Custodians, permissions, reconciliations, authority, deductions, and client disclosures are documented.
- - The firm can explain how client assets are protected if a vendor, broker, or manager fails.
Documents to prepare
- - Custody/client asset memo.
- - Client money and asset flow diagram.
- - Custodian due diligence and agreements.
- - Reconciliation, valuation, and break-resolution procedures.
- - Client disclosure and consent language.
Red flags
- - The firm says it has no custody while it can instruct transfers or deduct fees.
- - No one owns reconciliations or exceptions.
- - Custodian reliance is described without due diligence or exit planning.
Build steps
- 1. Map every asset and money movement.
- 2. Identify authority, control, reconciliation, disclosure, and vendor dependencies.
- 3. Run the custody trigger checker before finalising permissions or capital assumptions.
Disclaimer
Information on LicenseCompare is for general educational purposes only and does not constitute legal, regulatory, financial, tax, investment, or professional advice. Licensing requirements depend on facts and change over time. Always consult official regulator materials and qualified professional advisers.