Exculpatory Hedge Clauses in Investment Advisory Contracts: Development Since Heitman Capital

The Investment Lawyer, Vol. 21, No. 2, February 2014

St. John's Legal Studies Research Paper No. 19-0027

11 Pages Posted: 14 Jun 2019

See all articles by Francis (Jay) Facciolo

Francis (Jay) Facciolo

St. John's University School of Law

Leland Solon

Law Firm of Gary N. Weintraub, LLP

Date Written: 2014

Abstract

The Investment Company Act of 1940 (ICA) and the Investment Advisers Act of 1940 (IAA) prevent an investment adviser from contractually limiting liability to its advisees through three main routes: statutory anti-waiver prohibitions, the IAA's anti-fraud provisions, and limitations on indemnification by registered investment companies of their investment advisers. This article focuses on one of these three area, the IAA's anti-fraud provisions, and specifically, the SEC's expansive interpretations of those anti-fraud provisions to cover exculpatory "hedge clauses" - caveats or cautionary statements - by investment advisers purporting to limit their liability to their advisees. Hedge clauses remain very common in the investment adviser industry. In the first half of 2013, hedge clauses that triggered a finding of a contractual deficiency were commonly found in state and Canadian provincial examinations of investment advisers.

Suggested Citation

Facciolo, Francis and Solon, Leland, Exculpatory Hedge Clauses in Investment Advisory Contracts: Development Since Heitman Capital (2014). The Investment Lawyer, Vol. 21, No. 2, February 2014, St. John's Legal Studies Research Paper No. 19-0027, Available at SSRN: https://ssrn.com/abstract=3403809

Francis Facciolo (Contact Author)

St. John's University School of Law ( email )

8000 Utopia Parkway
Jamaica, NY 11439
United States
7189901832 (Phone)
7185911855 (Fax)

HOME PAGE: http://www.stjohns.edu/law

Leland Solon

Law Firm of Gary N. Weintraub, LLP ( email )

Huntington, NY 11743
United States

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