Investment advisory contracts (and most contracts, in general) are typically long, laborious and full of legalese. Paid-by-the-word attorneys have to pay for their silk ties somehow, right? If drafted properly, however, such contracts can also be immensely helpful in clarifying roles and responsibilities between the advisor and the client, and will hopefully decrease the likelihood of future disputes due to misinterpretations.
All investment advisory contracts must meet the requirements of Section 205 of the Advisers Act, but that’s not what this article is about. If you’d like to learn more about hedge clause and assignment restrictions contained in Section 205, for example, check out these two prior articles here and here.
NASAA also put together a handy model rule for investment advisory contracts, which can be found here.
What this article is about is the standardized boilerplate that may appear in your advisory contract, as well as some suggested items and clauses that would be a good idea to include.
The contract should speak for itself; if it ain’t in the contract, the parties didn’t agree to it.
This clause is intended to eliminate one party’s argument that an oral conversation, side letter, prior understanding or some other arrangement is what the parties agreed to. A related but sometimes distinct clause requires any amendments or superseding contracts to be in writing and signed by both parties.
Just because a party doesn’t hold the other party accountable for a particular breach of the contract doesn’t mean she is prevented from enforcing that same breach should it happen again, or from enforcing other provisions of the contract at her discretion.
In other words, no waiver of rights has occurred.
If the advisor and the client do not physically sign the same copy of the contract, a counterparts clause simply clarifies that the contract is still enforceable and the disparate signatures are integrated into one signature page.
Just use a digital signature service already and moot the need for this clause.