1987- pub. L. 100-181, fully revised and expanded provisions for investment advisory contracts, moving the structure of the section from a single paragraph without a letter to a paragraph consisting of four subsections containing points (a) to d). 1980- pub. L. 96-477 provided that 1 of this section should not apply to an investment advisory contract between an investment advisor and a business development company, as long as the remuneration under this contract has not exceeded 20% of the capital gains realized on the funds of the economic development company and such a business development company has no option , arrest warrants or rights issued pursuant to Section 80a-60, a), 3) (B) of that title and did not have a profit-sharing plan. As stipulated in paragraphs 2 and 3 of subsection (a), the “investment advisory contract” refers to any contract or agreement in which a person requires him or her to act as an investment advisor for another person as an investment company listed in sub-chapter I of this chapter or to manage it. The Commission may, as a general rule, prohibit or impose conditions or restrictions on the use of agreements that require clients or clients of an investment advisor to resolve future disputes between them, arising from federal securities laws, the rules and regulations mentioned in them, or the rules of a self-regulatory organization, when it finds that such a ban , the imposition of conditions or restrictions is in the public interest and investor protection. Safeguard clauses in investment advisory contracts – In some very limited cases, investment advisory agreements cannot contain hedging clauses. These clauses essentially free the advisor from legal liability, even if they are contrary to financial rules. You have the right to hold your advisor accountable if he acts with your money in a ruthless manner. If you come across investment advisory agreements that contain safeguard clauses, you should evaluate them carefully before signing.
You won`t want to give an advisor you rely on a free get-out-of-jail card if they act irresponsibly. Performance-based compensation – The role of an investment advisor is to seek your interests, not the interests of the advisor or the company.