Investment management contracts generally provide that the advisor is not liable to the client for wilful misconduct, bad faith, simple or gross negligence and/or breach of the trust obligation. Some agreements may also provide that the client exempts the advisor from third-party claims. While you should try to limit these types of rules, consultants tend to oppose significant changes. In addition, consultants are not permitted to limit commitments they would otherwise have under securities laws. The agreement should stipulate that the consultant provides his or her services in accordance with all laws and regulations. The agreement may also identify special requirements, such as for example. B registration of the adviser under the Federal Investment Advisers Act of 1940 or under national law. The agreement should specify the nature and frequency of written and oral reports. The reports are generally quarterly and should cover general market conditions, all activities on the account, current account outstandings and account performance based on relevant benchmarks. The agreement should also provide for additional reports upon reasoned request. The agreement should designate the depositary who will keep the assets in the account. The custodian bank should be a serious financial organization, for example. B a large bank or brokerage firm, and should be independent of the consultant (again to avoid Madoff`s situation).
When recommending a specific deposit bank, the advisor should explain the basis for their recommendation (e.g. B cost reduction, improvement of services or familiarization of the consultant with the depositary`s staff and systems). .