Are You an Unwitting ‘Fiduciary’?

The more influential you are with your clients, the greater your legal duty

Say all you do is recommend investment ideas to your clients and charge them brokerage commissions. You don’t execute their trades without their prior consent and you don’t charge them an advisory fee.

Winning Business Abroad

Beware of pay-offs to foreign officials

If you’re seeking an asset management mandate from a foreign government agency or if a private equity investee of yours is pursuing a foreign government license or contract, beware of a dangerous pitfall that could cost your firm and its principals dearly.

Principal Trading

Problems with the SEC Rule

A principal trade is a securities transaction between an asset manager and a client account over which the manager exercises discretion. Such trades can be advantageous to a client in situations where its manager either is the only available counterparty to a transaction or can save the client a market spread or brokerage commission by dealing with the client directly.

Sharing Trades with Other Firms

Okay only if all the benefits are passed on to your investors

Who owns the trades an investment adviser executes for its clients? Obviously, your clients own the profits and losses from the trades, but what if a third-party offers to pay you for combining its trades with yours so that it can take advantage of your favorable commission rates?

Performance Presentations

What can’t you say?

It goes without saying that false or misleading statements are prohibited in performance presentations. But money managers should also be aware of the following specific legal restrictions in reporting their track records to existing or prospective investors:

no client testimonials

no ‘cherry-picking’ of securities or clients

no graphs, charts or formulas for investors to follow

no gross returns only

no simulated results

All but the first of these prohibitions have exceptions, but each should be treated as a hard-and-fast rule unless you have explicit advice from counsel or a compliance professional to do otherwise.

Marketing UCITS Funds in the EU

Platform fees will surprise fund managers

If you are thinking about forming a UCITS fund in the EU, it may interest you to know that EU distribution platforms expect to be paid a minimum fee equal to 50% of your management fee for allowing retail shares of your funds to be made available to their so-called sub-distributors.