(Dow Jones) Advisors who trade clients' securities through omnibus accounts need to ask their qualified custodians a few questions before new Security and Exchange Commission custody rules take effect in March, say lawyers. ?

The rules, intended to bolster procedures for protecting client assets, will require qualified custodians who maintain funds for advisers' clients to send account statements directly to those clients as a verification that the funds exist.

That may not always be possible, however, in situations involving advisors who trade through omnibus accounts, says Timothy Johnson, a lawyer for Reed Smith in Pittsburgh who advises on investment management issues. An omnibus, or pooled account, is maintained by a financial institution to hold assets for multiple clients of an investment advisor.

Some advisors, such as Pran Tiku, president of Peak Financial Management in Waltham, Mass., say trading on behalf of clients through omnibus accounts has advantages. ??"They work very well for advisers and clients because there is ease of operation, transparency and low cost that can be achieved," he says. ?

Some custodians, however, may not have adequate trading or accounting systems in place to allocate securities within omnibus accounts for advisers' specific clients. The problem could prevent custodians from independently generating individual client statements, lawyers say. ?

Those custodians would need to ask advisors how to allocate the trades in order to prepare the statements, says Johnson. Verifying that information with an advisor in order to generate client statements would "defeat the spirit of the rules" and amount to inadequate compliance, he says. ??

Johnson and other lawyers have been advising clients who trade through omnibus accounts to ask questions about whether their custodians' trading platforms and accounting capabilities can provide the type of subaccounting needed for compliance with the SEC's new custody rules, which take effect March 12.

Some custodians, he says, may need to upgrade their systems to do the job. ??

"In some cases the omnibus model, in general, is under a fair amount of scrutiny," says Ronald Fiske Jr., executive vice president of Fidelity Institutional Wealth Services. ?

Fidelity and many other large custodians have trading platforms that can allocate positions in omnibus accounts based on an advisor's instructions at the time of the trade, and can then generate client statements without having to rely on the advisers' accounting at a later time. "It's part of our normal business model," says Fiske. ??

A Charles Schwab Corp. spokeswoman said advisors who used the company as custodian don't use omnibus account structures.

Tiku, of Peak Financial, says his firm's trading system interfaces with his custodian's. He is able, at the time of the trade, to direct the custodian how to allocate the shares among his clients so the custodian is able to conduct the subaccounting it needs to generate statements. ?

Some tech-savvy smaller custodians also provide the type of subaccounting within omnibus accounts that allows for adequate compliance with the new rules. For example, David Roberts, president of National Advisors Trust Company, FSB, in Overland Park, Kan. says his company keeps track of client allocations through accounting technology from SunGard Data Systems Inc., an information technology services company in Wayne, Pa. ??

Tiku says that technology linking advisers to larger custodians currently works well in terms of its ability to allocate trades and generate the client statements required under the new rules. ??

But more regulation could change that.

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