Fiduciary Standard
The anti-fraud provisions of the Investment Advisers Act of 1940 and most state laws impose a duty on IAs to act as fiduciaries in dealings with their clients. This means the adviser must hold the client's interest above its own in all matters. The Securities and Exchange Commission (SEC) has said that an adviser has a duty to:
- Make reasonable investment recommendations independent of outside influences
- Select broker-dealers based on their ability to provide the best execution of trades for accounts where the adviser has authority to select the broker-dealer.
- Make recommendations based on a reasonable inquiry into a client's investment objectives, financial situation and other factors
- Always place client interests ahead of its own.
Read more about this topic: Investment Advisor
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