Finding A Way.

Newly-Registered Investment Advisers: Understanding Your Fiduciary Obligations

investment adviser complianceAs we have been discussing on this blog, many advisers to private equity and hedge funds will be required to register as investment advisers with the SEC by March 30, 2012. As the deadline for registration approaches, advisers should be preparing to comply with all the requirements of the Advisers Act.

Under the Investment Advisers Act, an adviser must act as a ”fiduciary.” What does this standard really mean, you will ask?  You won’t find a definition in the act itself.  But in the nearly 70 years since it was written, the Supreme Court and various state courts have created a body of case law that defines it.

As a fiduciary, you need to put your clients’ best interest first and act in “utmost good faith.” You need to act in a prudent, impartial and disinterested manner. You need to disclose in writing conflicts and all material facts and should not engage in any activity that would jeopardize your ability to render unbiased advice. You need to avoid, or manage in the clients’ best interests, all material conflicts; and disclose fees and control expenses.  You also need to follow and document the due diligence process in making decisions; and diversify the client’s investments.  This is quite different from the bare minimum of “suitability” that applies to brokers.

I must admit I struggled with this blog, as the term seems amorphous at first glance. But then it really isn’t. You know a conflict when you see one. Trust your instincts. Your clients trust you, and they can.

Eckerle Law offers a highest-quality and cost-effective alternative to the traditional law firm model for a wide variety of transactional and regulatory matters serving all your business law needs. Our experienced attorneys also provide a full range of compliance services for investment advisers, offering compliance tools that are tailored to fit the ever changing regulatory landscape as well as your business needs.

If your company would like to strengthen its business practices, please contact us today so we can leverage our experience to create real-life business and legal solutions to help your business thrive.