For an investment advisor maintaining custody of clients' assets, where must securities be deposited?

When an investment advisor maintains custody of clients' assets, it is essential to deposit securities with a qualified custodian. This is because a qualified custodian, which could be a registered broker-dealer, bank, or other financial institution, is specifically equipped to safeguard clients' securities and ensure compliance with regulatory requirements.

Using a qualified custodian helps to protect clients' assets by ensuring that they are held in a secure environment and that there are appropriate measures in place for record-keeping and accounting. These custodians are also subject to regulatory oversight, which adds an additional layer of security for the clients’ investments.

In contrast, depositing assets in a personal holding account would be inappropriate as it could lead to conflicts of interest and a lack of protection for the clients. Similarly, while a bank vault might seem secure, keeping clients' assets in a physical vault does not meet the regulatory requirement of having assets held by a qualified custodian. Finally, placing assets in a diversified portfolio refers to the distribution of investments across various asset classes but does not address where the actual securities should be held, which is why it is not the correct choice.

Overall, the use of a qualified custodian is critical in ensuring the safeguarding and proper management of client assets, which