Comprehensive Institutional Breakdown
Under the SEC Custody Rule, RIAs do not directly hold client money; instead, independent qualified custodians (e.g., Charles Schwab, Fidelity, BNY Mellon) hold the securities. This structural separation prevents Bernie Madoff-style embezzlement, ensuring statements and trade confirmations originate independently from the custodian.
Carl Brent Anthony Institutional Rule
Never deposit capital with an advisor who acts as their own custodian. Assets must always be held in segregated institutional accounts under the client's own name.
Institutional Scenario Example
A client grants their fiduciary RIA limited trading authorization (LPOA) to execute rebalancing at Charles Schwab without granting withdrawal access.
Cross-Market & Execution Note
In cryptocurrency, cold-storage hardware multisig replaces centralized custodians for true sovereign self-custody.