Performance Compensation and Contract Terms

Overview

This page provides materials on the requirements applicable to investment advisory contracts. While the most significant of these requirements may be a limitation on the ability of investment advisers to charge performance compensation or incentive compensation fees, a number of other requirements apply including restrictions on the assignability of investment advisory contracts. In addition, issues have arisen as to whether investment advisers may, or should be permitted, to include certain contract provisions that may benefit investment advisers such as (i) so-called "hedge clauses" in the contracts, which limit the adviser's liability to its clients to acts of gross negligence or willful malfeasance, as opposed to subjecting the adviser to liability for ordinary negligence and (ii) mandatory pre-dispute arbitration provisions.

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Senior Counsel
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Partner

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