Quick Answer
Agents may never borrow from, lend to, or act as custodian for a customer, with no exceptions of any kind. Investment advisers face a narrower rule: an IA may borrow only from a client that is a broker-dealer, an affiliate, or a lending financial institution, and may lend only when the IA itself is such an institution or the client is an affiliate.
The rules on borrowing and lending between securities professionals and their customers are one of the most frequently tested topics on the Series 63, precisely because the exam likes to test whether an exception that applies to advisers also applies to agents (it does not).
Why Is the Agent Rule an Absolute Prohibition?
An agent:
- May never borrow money or securities from a customer
- May never lend money or securities to a customer
- May never act as custodian for a customer's money, securities, or executed stock powers
- There are NO exceptions: not for family members, not for financial institutions, not for affiliates
This is a bright-line rule with zero flexibility.
Do Investment Advisers Get Any Exceptions?
For the Series 63, the agent rule above is the focus, but the exam frequently tests the contrast with investment advisers. An IA is not under a flat prohibition:
- An IA may borrow from a client that is a broker-dealer, an affiliate, or a financial institution in the business of lending
- An IA may lend to a client when the IA itself is such a financial institution or the client is an affiliate
The point to remember is the contrast itself: agents have no exceptions; advisers have a few.
An affiliate is an entity that controls, is controlled by, or is under common control with the IA, such as a corporate parent, subsidiary, or sister company, not simply a wealthy or well-connected individual client.
Side-by-Side Comparison
| Agent | Investment Adviser | |
|---|---|---|
| Borrow from customer/client | Never | Only if client is a BD, affiliate, or financial institution |
| Lend to customer/client | Never | Only if IA is a financial institution or client is an affiliate |
| Act as custodian | Never | Subject to separate custody rules |
| Exceptions for family members | None | None (family relationship alone does not create an exception) |
| Exceptions for banks | None | Yes - banks qualify as financial institutions |
Exam Tip: Gotchas
- Common trap: "An agent's client is a bank. May the agent borrow from the client?" The answer is no. The financial institution exception applies only to IAs, not to agents. Agents face an absolute prohibition regardless of who the client is.
What Should You Check on Exam Day?
- Agents: zero exceptions, ever, for borrowing, lending, or acting as custodian.
- Advisers: the exception depends on the direction of the loan. Borrowing FROM a client requires the client to be a BD, an affiliate, or a lending institution. Lending TO a client requires the IA itself to be a lending institution or the client to be an affiliate.
- If a question swaps an adviser exception onto an agent fact pattern, the correct answer is still that the agent may not do it.