More On Legal & Compliancefrom The Advisor's Professional Library
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
- Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.” The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.
Research Affiliates and WisdomTree Investments said early Thursday that they had reached a settlement regarding patent infringements and that Research Affiliates will pay WisdomTree $700,000 and withdraw its lawsuit.
"Based on information that came to our attention during the lawsuit, Research Affiliates can now acknowledge that WisdomTree's fundamentally weighted indexes and strategies were developed by WisdomTree independently of Research Affiliates," said Robert Arnott (left), chairman and CEO of Newport Beach, Calif.-based Research Affiliates, in a press release.
Research Affiliates produces asset-allocation and other strategies used to manage some $110 billion in assets worldwide. WisdomTree is an exchange-traded fund sponsor and asset manager with 49 products with some $16.8 billion in assets under management.
The two parties say that this settlement agreement resolves all matters pertaining to the lawsuit, which was brought in the U.S. District Court for the Central District of California, and that they will henceforth “respect each other’s intellectual property and patents.”
"We are pleased the matter is resolved and our businesses will continue as usual," said Jonathan Steinberg, CEO and president of New York-based WisdomTree, and Arnott in a joint statement.
Research Affiliates also says that it has agreed not to sue WisdomTree for any future claims arising under any current patents held by Research Affiliates, as well as any future patents relating to fundamentally weighted indexes and strategies that may issue under existing or future patent applications that may be filed by Research Affiliates within the next eight years, subject to a reduction by up to three years if Research Affiliates is acquired.
The “not to sue” covenant also includes service providers and customers of WisdomTree’s products and services.
For its part, WisdomTree has agreed not to sue Research Affiliates with similar terms and conditions.
The parties say that the “not to sue” stipulations do not include a right under each party's patents to copy the other party's methodologies. They have further agreed that it is not copying if Research Affiliates introduces an index or strategy that uses at least three fundamental factors to weight its indexes, if they are not predominantly dividend- or earnings-weighted, or if WisdomTree introduces an index or strategy that is weighted by less than three fundamental factors.
The parties have also agreed not to challenge the other party's patents or patent applications.
WisdomTree also said that the settlement will not affect the current methodologies and fee schedules for its ETFs.
In its latest ETF report, Morningstar says that less than $2 billion of net new money went into ETFs in October, after $33 billion poured in during September.