A friendly reminder to portfolio managers that there are a number of regulatory expectations around investment management agreements. For example, each investment management agreement entered into with a client must be dated, signed in a timely manner by a member of senior management of the firm, contain accurate fees and contain certain baseline content. The agreement should set out the services to be provided, the roles and responsibilities of each party, and address all aspects of the investment advisory process. At minimum, an investment management agreement should usually contain the following:

  • The type of authority the PM has over the client’s assets;
  • A description of how the client’s assets will be held;
  • Any client instructions or restrictions;
  • Who is responsible for proxy voting and insider reporting;
  • A description of how any conflicts of interest impact the services to be provided;
  • A detailed provision for fee arrangements (i.e., calculation of payment, timing of payment, any sliding scales or most favoured nation clauses);
  • A statement that the PM is required to manage assets in accordance with the client’s know-your-client information; and
  • The notice period and process for terminating the agreement.

An investment management agreement is a “living” document. If the understanding or arrangement with a client changes over time (for example if fees change), the agreement should be kept current and amended accordingly. Any schedules to the agreement (explaining a firm’s privacy policy, for example) should also be checked periodically to ensure the client has access to the most recently applicable disclosure.

April 29, 2022