Advisor Check Deposit

Transcription

1 Advisor Check Deposit Frequently asked questions These FAQs are intended as general information and should not be construed as legal or regulatory compliance advice. Advisors particular circumstances will affect the answers to questions about the SEC Custody Rule, and advisors should consult their own legal counsel and compliance advisors. Schwab makes no representation or warranty about the accuracy or completeness of this information and does not undertake any obligation to update it. Click on the links below to view our questions that cover three general topics: Features and benefits Process and workflow Custody rules Features and benefits What is Advisor Check Deposit? Advisor Check Deposit is a new solution offered on the Schwab Advisor Center website that allows advisor firms to deposit checks online on behalf of their clients. What are the benefits to our firm adopting Advisor Check Deposit? There are many benefits to adopting Advisor Check Deposit, such as: Faster posting Check funds will post the same business day when submitted before the cut-off time, (5pm Eastern Time on normal business days) allowing firms to invest funds sooner compared with mailing a physical check to Schwab. Reduced costs Firms will reduce their shipping costs by being able to deposit checks online. Security Depositing checks online is a more efficient method to submit funds compared with physical mailing because it will leverage the secure encrypted connectivity that firms have using Schwab Advisor Center. Visibility Firms will have greater visibility and self-service capabilities when using online check deposit. Increased efficiencies Operational efficiencies can be improved by entering and tracking deposits online. Improved quality and accuracy By providing firms with such features as account lookup, verifying deposit account status, and flagging of deposit discrepancies detected prior to submission, firms reduce potential errors in processing deposits. 1

2 How does Advisor Check Deposit work? Your firm will make digital images of checks received at the office for deposit. These scanned check images are then uploaded to Schwab Advisor Center through a secure connection. To complete the deposit process, you will provide the necessary information for each check, such as the target brokerage accounts. Groups or batches of checks can be deposited at the same time. Advisors have the ability to edit and review deposit information prior to completing the submission process. How do we start? Before you can access this new functionality on Schwab Advisor Center, you must first accept a new online agreement specifically for depositing checks online. This agreement states that firms granted access to online check deposit agree to follow Schwab processes and procedures for risk management and control when using the tool. Then the Firm Security Administrator (FSA) at the advisor firm will need to grant online deposit access to individuals responsible for submitting deposits to Schwab. You can learn more about getting started by reading the new Advisor Check Deposit content in the Service Guide. Are there any hardware or software costs to use Advisor Check Deposit? If you already have a scanner, there are no additional hardware or software costs to use Advisor Check Deposit, and there is no requirement to download or install desktop software. The online check deposit tool is available through Schwab Advisor Center, so all you need is your existing web browser. Use your scanner to scan the front and back of your clients checks, and save the check images to your local computer or network for temporary storage before uploading to Schwab Advisor Center. How secure is Advisor Check Deposit? Advisor Check Deposit leverages the existing encryption technology that is provided to advisor firms when logging in to Schwab Advisor Center. You can read more about security measures that Schwab provides to keep private information and assets safe by visiting the SchwabSafe page here: legal_compliance/schwabsafe. Is there a limit to how many checks that can be deposited at a time? No. There is no limit to the number of checks that can be deposited in a single submission. Can I submit batches of deposits more than once a day? Yes. You can submit check deposits multiple times a day. Is there a mobile option to deposit checks through Schwab Advisor Center? No, there is currently no mobile option to deposit checks online through Schwab Advisor Center. However, your clients can deposit checks directly to their Schwab accounts by downloading and using the Schwab Mobile Deposit application available for iphone, ipad, and Android smartphone users. See more details or direct your clients to Schwab Mobile Deposit on our website: schwab_mobile_deposit. 2

3 Are there limitations for depositing checks online through Schwab Advisor Center? The current limitations for depositing checks through Advisor Check Deposit are: The amount that may be deposited for a single check is limited to $250,000. There is no limit for total daily online deposits. Foreign checks are not accepted for online deposit. These must be mailed to Schwab for deposit. The following types of client accounts are not supported for deposit: Any bank account such as checking, savings, etc. SIMPLE retirement plans 529 education savings accounts Testamentary Trusts Usufruct Accounts Inherited IRA accounts KEOGH holding or inherited accounts Master accounts For IRA deposits: Transfers of any kind Contributions to inherited IRA Rollover deposits to IRAs are supported, but it is up to your firm to determine if the rollover is allowed per IRS guidelines (refer to table 1-4 Rollover Chart, IRS publication p590a/ch01.html#en_us_2015_publink ). Not all fields on the physical check are scanned when it is uploaded for deposit. Can I still deposit client checks by mail? Yes. Advisor Check Deposit, in its first release, will not be able to support all types of check deposits. For any checks that cannot be deposited online, you can still mail those physical checks in to Schwab as you normally would today. Our goal, over time, is to support as many check deposit scenarios online as possible so that firms will seldom have to mail physical checks for deposit. Process and workflow Can I use a stamp to physically mark checks as ELECTRONICALLY DEPOSITED after depositing them? Yes. The Advisor Check Deposit Terms of Use require that the top half of the front of physical checks be indelibly marked ELECTRONICALLY DEPOSITED after the check image is successfully uploaded to protect against the risk of duplicate deposits. You can use whatever method of indelible marking you choose, including an ink stamp or hand marking. If you choose to use a stamp, ensure it s at least 9/16 x11/2 (14mmx38mm) stamps of this size or larger are available from a number of online vendors, including the Trodat 4911available at What do I do with the physical checks after I upload the images? You must securely retain the original physical check for 14 calendar days after the check is posted. Check images that post could have issues discovered after the posting date that prevent the deposit, and may require the physical check be sent to Schwab for processing. You must promptly and securely destroy the physical check 14 days after posting. Do I need to upload the back of check images for electronic deposit? 3 Yes. Schwab must receive both sides of the check to comply with banking requirements for clearing checks electronically.

4 How do I decide between the two different check image upload options? Each of the options for uploading checks offers certain advantages and limitations: Uploading a single file that includes both front and back images is an easier process to manage, but requires more up-front setup. In addition, some office scanners do not support TIFF files, which are required for the single file option. Uploading two files, one for the front and one for the back is quicker in terms of creating the scanned files, but means you have to ensure that you keep each set together when uploading the images. For greater convenience and ease of use, Schwab recommends the one file per check upload method, if advisor firms have a scanner that can create a single image file containing the front and back of the check on separate pages. Support for PDF images is planned for a future release, which will also support having the front and back of the scanned check images saved to a single file for upload. What are the supported image formats for creating and uploading digital copies of checks? The supported images formats are JPG, GIF, and PNG when uploading separate front and back images for each check. The TIFF format is required when uploading single images that include both the front and the back of the check. Support for PDF images is planned for a future release, which will also support having the front and back of the scanned check images saved to a single file for upload. What are the requirements for endorsing checks using Advisor Check Deposit? The Advisor Check Deposit Terms of Use require that checks are properly endorsed. Institutions through which check deposits are processed may reject checks without proper endorsements. Please be sure that checks payable to your client are endorsed by your client and any other payee before scanning the check and uploading the check image. For example, a check made payable to John Doe AND Jane Doe must have endorsements from both John and Jane. Checks drawn by the client and made payable to Schwab do not require endorsement. The client account number should also be included as part of the endorsement if it does not appear on the front of the check. I am getting a quality error when trying to upload a check image. If you get a quality error message when uploading a check image, read the details of the error message to identify the problem. Check images must be legible, aligned properly, and must not contain any defects that would prevent successful execution of the scan. Some reasons why a scanned check image will fail include the following: Too dark or too light Crooked or rotated off center Truncated or incomplete Contains streaks or has bands across it Excessive noise or spots on the image Thin dark stripe near the horizontal or vertical edge is created during the scanning process Background pattern or artwork on the check document that interferes with the scanning process Security features in the physical check document that prevent successful scanning You can try to create a second scanned image of the check to see if that addresses the quality error reported. If using a flatbed scanner, try cleaning the glass and cover surface that touches the glass when closed. For dark check images, try to lighten the image by adjusting the brightness, contrast or density level depending on the model of your scanning machine. If the second attempt to create a scanned check image also fails to pass the quality check, you can cancel or remove this particular check from the deposit batch, and send it to Schwab via overnight mail for deposit. 4

5 I am getting a dimensions error when trying to upload a check image. There are two likely reasons for this error: The DPI setting on your scanner is not set to 200. The check is light colored and does not have a defined border or box around the edge. This can sometimes lead to incorrect automatic cropping during the scanning process. I scanned my checks and all the images are upside down. Do I have to rescan them? Advisor Check Deposit allows for some tolerance on alignment of check documents. Checks that are upside down or sideways, assuming the full check image is present, will be auto corrected most of the time. However if the images have problems uploading, you may need to rescan the checks to create new images. When I view the uploaded check images on Schwab Advisor Center, the quality is not as good compared to the original scanned versions. Why is that? If you scan your checks and save the images in color or gray scale, they have a higher quality than black and white. When uploading checks online, all images get converted to bitonal or black and white, which may result in decreased quality compared to the original image. If you can see the amount of the check in the uploaded image, the payee name and the signature, the check is still acceptable for deposit. One of my uploaded check images appears unreadable even though no errors were reported. Should I continue to submit it for deposit? No. If by chance a poor quality check image gets past the quality review phase without any errors reported, you should remove it from your list of checks, and create a new check image for deposit. If this does not correct the problem, you will need to send the physical check to Schwab for deposit. If you cannot view the check amount or the MICR line (string of digits at the bottom of a check), the payee name or the signature after uploading your check images, the image will not be accepted by Schwab. The back of a check image does not undergo the same level of quality review, but any endorsements or account numbers present should still be visible. What are best practices and tips for generating digital images of checks to upload? Schwab has designed the Advisor Check Deposit application to handle a variety of scenarios for how check images may be generated by firms. To ensure that you have the highest possible chance of successfully uploading check images, please follow these guidelines: Cropped images generally have fewer quality issues and will finish the normalization process faster compared to uncropped images. Straight alignment of physical checks before scanning will reduce rotation offsets, which can cause uploaded image files to fail. Ensure scan surface area is cleaned regularly. Inspect edges of image files to ensure no thin lines are present for uncropped images, as this can result in normalization failures. Checks from your clients that are printed or typed will have a higher success rate reading data off the check images for deposit, such as the amount of the check. How come not all check fields are captured and displayed in the UI? The online check deposit technology has known limitations on the check fields that can be automatically scanned for values. Currently, only the numerical amount of the check is scanned, along with the MICR line at the bottom of the check. Additional check fields in the interface are optional and are not currently used. 5

6 What happens if the amount field was not read after uploading my check image? If the amount field for a check image is blank or incorrect, simply enter the correct value by clicking edit check. You will see a warning message after editing the amount field of a check, indicating it was altered. This warning message will not prevent you from submitting the check for deposit to Schwab after you enter the amount value. What fields are required for deposit? Advisor Check Deposit requires two fields for all check deposits: the client account field and the amount field. If the deposit is to a retirement account, the contribution type must also be selected. The other editable fields such as the date of the check, date received, notes, etc. are intended for future enhancements to this tool. Can I split a check deposit to an IRA between tax years? Yes, this is available under the Split Check link. However you cannot split funds designated for a retirement account to a non-retirement account. How come my client s account does not display in the online deposits tool? There are a few reasons why a valid Schwab brokerage account will not display in any search results when you are attempting to deposit a check: (1) that account is not linked to your firm through any existing master account, (2) your login account does not have permissions to view the account, or (3) that account type is not supported for online deposits. You can quickly determine if the problem is due to permissions or ineligible account type by searching for the account number on the Profiles page within Schwab Advisor Center. Be sure personnel have the proper security and access permissions to deposit checks online before using the tool, as set up by your firm security administrator. What type of retirement accounts are supported by Advisor Check Deposit? The majority of IRA account types are supported for online deposit, including Individual, Rollover, Roth and SEP IRAs. Individual 401K accounts are also supported. Keogh Participant accounts are the only QRPs that are supported. Any retirement plan that requires a transmittal form to deposit to multiple accounts, such as a SIMPLE retirement / IRA plan, is not supported. Advisor Check Deposit requires selecting a contribution type for deposits to retirement accounts. IRA accounts have the option to select the tax year or specify if it is a rollover deposit. Individual 401K deposits must specify if the contribution type is an employee or employer contribution. Rollover deposits to Individual 401K accounts are not supported. What check endorsement guidelines should I advise my clients to follow when they request our firm to deposit checks on their behalf? Have your clients restrictively endorse checks they provide to you for deposit. Different banks have their own rules and procedures for determining acceptance of checks without endorsements. While some may pay checks without endorsement, there is a risk that a deposited client check lacking endorsement could be returned by the payor bank. Schwab has observed that certain institutions are especially stringent in requiring proper endorsement of specific types of checks, such as those issued by title companies, insurance companies, escrow accounts, and litigation settlements. Having your clients always endorse checks you deposit avoids potential delay. Clients should provide a restrictive endorsement by including at least the words, for deposit only to Schwab account and, if they choose, the Schwab account number. By including this restriction in the endorsement, your client mitigates any perceived risk associated with mailing you an endorsed check. Checks made directly payable to Charles Schwab do not require endorsement by the client, but your client should include the account number for deposit on the check, such as on the memo line. How can I see the status of checks once I deposit them online? Integrated history and status is not currently available for Advisor Check Deposit. You can view check deposit status and history for individual client accounts under the Move Money section of Schwab Advisor Center. Check deposit adjustments and corrections that occur after the day of deposit are available on the Transactions page within Schwab Advisor Center. 6 A check I submitted earlier is not appearing in the client account. Should I re-submit the check? No. Unless specifically instructed to do so by Schwab, do not re-submit a check that has already been submitted

7 When a check posts to my client s account, are those funds immediately available to our firm? When checks are posted, it means that Schwab has formally acknowledged receipt of the check, and no basic issues were encountered when processing the check for deposit. However, posted funds are not always immediately available for all activities. Depending on the amount of the check and the assets held by the account owner, Schwab might set aside a portion or all of the deposited funds to be held until the check clears with the drawee bank. Held funds cannot be withdrawn from the account until the check clears, but can still be invested. A check that is posted could still be rejected later for a variety of reasons, such as non-sufficient funds (NSF) or if it is a duplicate check. Can I deposit a check if the image upload generates a warning message? Yes. Warning messages inform you of potential deposit issues, but are not considered severe enough to stop the deposit from being submitted. Checks with warning messages are visually distinguished with a yellow triangle icon and may be delayed for deposit if they require a manual review. Can I deposit a check if the image upload generates an error message? No. An error message is a more severe condition that either must be corrected before submitting or the check must be removed from the deposit batch and mailed to Schwab separately for deposit. Check error messages are visually distinguished with a red stop sign icon. The specific error message will provide details to help you resolve the problem. I just submitted a batch of checks for deposit, and soon after someone handed me a client check to deposit the same day. Can I add this check to a previous batch that was already submitted? No. Once a batch of checks is submitted online for deposit, the contents cannot be altered. You can create a second deposit batch for any additional checks. After I submitted a batch of checks for deposit, I realized there was a mistake or I want to recall a deposit. What should I do? Altering check information after submitting for deposit cannot be performed in the tool. You will need to call your Schwab Advisor Services team for assistance. They can handle requests to adjust check information, such as wrong account number and wrong amount value, or void a check. Please have the following information available when requesting assistance with deposited checks: The date you submitted the deposit to Schwab The amount of the check The brokerage account number the check was deposited to The check number If you need to make corrections to deposits already submitted, contact Schwab before 7 p.m. ET on the same business day of the submission. After the cut-off time, there is no guarantee that deposit corrections can be made that day. Can personnel at my office submit deposits under the same Schwab Advisor Center login? No. Sharing user credentials is a security risk and violates the agreement your firm signed with Schwab for access to Schwab Advisor Center. If more than one staff member wants to submit checks for deposit, they must use their own login. 7

8 What should I consider when deciding whether my firm should purchase a dedicated check scanner? First, we recommend you determine whether your current scanning device (multi-function copier, etc.) can consistently upload checks for deposit without errors. While no check scanner will produce check images that pass validation 100% of the time, if you current scanner technology is producing check image files that fail validation often or cannot produce multi-page image files, you might want to consider investing in a low-cost, desktop model scanner that will provide better upload success and more convenience. When evaluating scanners, look for time-saving features like these: Ability to scan both sides of a check in one pass without the need to flip the check manually Support for creating multi-page image files, where the front of the check is on the first page and the back of the check is on the second page A document feeder tray allowing you to stack and scan multiple checks for deposit automatically Convenience is also a consideration. If your firm deposits checks often, and the shared scanner is not near your office desk, having a desktop scanner that can write check image files directly to your computer can save valuable time. And finally, you want to consider your firm s budget for office hardware purchases. Fortunately, there are desktop scanners on the market that meet requirements for Advisor Check Deposit at an affordable price. The following question about check scanners below provides more guidance should your firm wish to purchase a scanner primarily for scanning check images. Are MICR / check scanners supported for use with Advisor Check Deposit? MICR scanners that are designed specifically for scanning check documents are not supported for use with Advisor Check Deposit. However, new desktop scanner technology is available that provides all the necessary features for scanning check images at an affordable price, and does not require custom software. These desktop scanners can also scan other office documents, such as legal documents, forms, letters, and business cards. Some firms may have existing desktop scanners in use that meet Advisor Check Deposit scanning requirements. These desktop scanner models that can be used in place of a MICR scanner should have the following capabilities: Ability to crop check images automatically at scan time. This setting may appear on some scanner configuration software as a paper or page size setting option to match original size or automatic detection. Support for duplex scanning- scan the front and back of the document in one pass Ability to save the front and back of a check image in a single file formats supported are 2 page TIFF or 2 page PDF. 200 DPI support Black and White or Grayscale color settings Tray feed to scan multiple documents at a time Settings to customize the file name and numbering when saving scanned images Support for both Windows and Mac computers If your office scanner has these features, it should be able to be used with Advisor Check Deposit on Schwab Advisor Center. The following scanner models, widely available online and at retail electronic stores, have been evaluated by Schwab for use with ACD: Canon P-215ii Fujitsu ScanSnap ix500 (other ScanSnap models should work too) Some firms have provided positive feedback using the Xerox Documate 152i desktop scanner, but at this time Schwab has not had a chance to evaluate this model internally. While scanners that do not perform auto-cropping for scanned images can be used with Advisor Check Deposit, Schwab recommends use of a scanner that can match the original size of a document when scanning to achieve the best results. 8

9 Can images be cropped manually after scanning? Schwab recommends against using a separate tool to crop check images. The act of cropping an image file at rest can alter properties of the original image to render it incompatible with Advisor Check Deposit. Manual cropping is also subject to potential error when selecting the width and height of the scanned check document. The preferred method is to select a scanner that does the cropping of images at scan time without manual intervention. Can I deposit a check via Advisor Check Deposit for a new client account opened online? Client accounts must be first linked to a Master account in your firm before they become visible for selection from Advisor Check Deposit. This process usually takes 1 to 2 business days to complete. Can I use Advisor Check Deposit with a Mac computer? Yes, there are desktop scanners compatible with Advisor Check Deposit that support Mac computers. Please contact your Schwab service team for further assistance. Can I adjust the as of date for a check deposit to an IRA account, if it arrived by mail after the calendar deadline for the current or previous tax year? No, you must submit the check along with the original envelope by mail to Schwab for deposit. Please be sure the postal date is clearly marked on the original envelope, and include written instructions as to the date the check deposit should be adjusted to. If I encounter problems with online deposit, what do I do? The warning and error messages should be sufficient to assist you when problems occur. If problems still persist, checks with unrecoverable errors can be mailed to your nearest Schwab Service Center for deposit. Please be sure you send the original physical check, not a copy. In addition, you can contact your Schwab Advisor Services team for help. Custody rules Isn t taking possession of a check considered custody under the SEC s Custody Rule? Not necessarily. It depends on the particular check and what you do with it, as discussed in the following FAQs. If I receive a check from my client with instructions to forward it for deposit into the client s account, is that custody? It s clearly not custody if the check is drawn by the client and made payable to Schwab (the qualified custodian). The custody rule says this. In addition, while not explicitly addressed by the rule, by applying the same logic it should not be custody if the check is drawn by a third party and made payable to the client and the client has specifically endorsed the check for deposit into the client s Schwab account. In either case, you should promptly forward the check to Schwab for deposit into the client s account, by either uploading it through Advisor Check Deposit or by mailing or overnighting the physical check. What if I receive a check payable to the client directly from a third party? Can I forward that check for deposit? No. Your receipt of the check will be deemed custody unless you return the check to the sender within three business days of receipt. Forwarding the check to the custodian within that same three-day timeframe will not avoid custody, and worse, your possession of the check probably violates the custody rule s requirement that client assets be held by a qualified custodian. Only in very limited circumstances that involve inadvertent receipt by the advisor of certain class action settlement, tax refund and dividend payment checks can the advisor forward the check to the custodian for deposit without the advisor s possession being custody. 9

10 What if the check is made payable to me or my firm? Your possession of the check is considered custody, even if you promptly forward it to Schwab for deposit. The client should make the check payable to Schwab instead of the advisor. Note that this is different than your receipt of clients checks payable to you for your fees, which of course you are not going to deposit into client accounts and are not considered custody. Does it matter how I forward the check to Schwab? What if instead of mailing the physical check, I upload a digital check image on Schwab Advisor Center? No. Either of those methods of forwarding the check is permissible and do not affect whether the advisor s possession of the check is considered custody. If it wasn t custody, it still isn t. If it was custody, it still is. Regardless of whether you use Schwab Advisor Center or mail to deposit a check, you should do so promptly following your receipt of the check. What should I do with the physical check if I make the deposit by uploading the scanned check image on Schwab Advisor Center using Advisor Check Deposit? You must retain the physical check and then securely destroy it 14 days after it posts to the client account. You must also indelibly mark the top half of the front of the check ELECTRONICALLY DEPOSITED immediately after you successfully upload the check image. You must also securely delete and destroy any electronic image of the check stored on your systems promptly following successful upload. These safeguards are required by your agreement with Schwab for the use of the check deposit service on Schwab Advisor Center and are intended to prevent both representment of the check for duplicate deposit and compromise of your client s personal information. As a best practice, advisors should keep a log of their receipt and forwarding of checks for deposit in client accounts ( including client name, dates of receipt and forwarding, account to which deposited, etc.), but that log does not need to include copies of the checks. Important Please read: These FAQs were prepared on May 19, They are intended as general information and should not be construed as legal or regulatory compliance advice. Advisors particular circumstances will affect the answers to questions about the SEC Custody Rule, and advisors should consult their own legal counsel and compliance advisors. Schwab makes no representation or warranty about the accuracy or completeness of this information and does not undertake any obligation to update it. For advisor use only. Any investments reflected are for illustrative purposes only and are not intended to be nor should they be construed as a recommendation to buy, sell, or continue to hold any investment. Schwab Advisor Services includes the custody, trading, and support services of Charles Schwab & Co., Inc. Schwab does not provide legal, tax, or compliance advice. Consult professionals in these fields to address your specific circumstance. Schwab Advisor Services serves independent investment advisors and includes the custody, trading, and support services of Schwab. Independent investment advisors are not owned by, affiliated with, or supervised by Schwab Charles Schwab & Co., Inc. Member SIPC. All rights reserved. TWI (0517-ZTP6) SLS (05/17)