New York Securities Fraud Lawyers Blog
The Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) allow adults to give or transfer assets to minor beneficiaries. The slight difference between the accounts is that the UGMA is limited to financial assets while the UTMA includes any tangible or intangible assets. These accounts allow children to safely invest and build up capital legally before they become adults. There are also tax benefits to these accounts as contributions are made with after-tax dollars. If you believe your brokerage firm failed to supervise your trust account or the advisor managing your trust, you need to consult a New York Failure to Supervise Trusts Law Firm like Malecki Law.
Each of these accounts have a custodian who acts in the child’s interest as a fiduciary. This means that the investments made and the way the money in the accounts is managed must be for the child’s benefit. When the minor reaches the age of majority, the custodian no longer has authority to make decisions on behalf of the beneficiary and the beneficiary continues to monitor the account on their own. Additionally, once the money is transferred to the beneficiary, it is permanently their property.
FINRA Rule 2090, the “Know your Customer” rule, requires firms “verify the authority of any person purporting to act on behalf of the customer. So, brokerage firms and their members are supposed to know the essential details about who is acting on behalf of the customer (i.e. the custodian). Did your brokerage firm fail to “know” your custodian? Did you suffer losses because of this? You should reach out to a New York Failure to Supervise Trusts Lawyer like the lawyers at Malecki Law for a free consultation. The member must not only know the customer at the beginning of their relationship (account opening) but throughout the whole of the relationship. In line with this “Know your Customer” rule, firms are supposed to have a supervisory system for their members, which makes sure brokers are in compliance with procedures. The problem is that many firms do not have supervisory procedures in place for UT/UGMAs. In turn, the brokers do not know their customers, resulting in custodians not being monitored.