As an investment adviser I am often the first person to bring to the attention of senior management and the boards of directors about the various ethical and legal problems that are occurring within the organization. One of my most favorite cases that has been cited in many law journals, as well as in media reports, involve conflicts of interest that have come about due to the investment adviser having contact with certain clients. This article discusses the Employment Practices Act, Investment Adviser Law, and Whistleblower Protection Rule, which were primarily responsible for exposing these unethical behaviors.
As an investment adviser I am very aware of the regulatory compliance requirements that we must meet. I am also very concerned when my client is not receiving the full benefits of their investment because of some unethical actions by the investment adviser. I see these acts as a violation of our clients right to receive a fair return on their investment.
There are a few different types of regulatory compliance that all investment advisers must adhere to. First, each of us must make a good faith effort to provide a competent and appropriate advice to our clients. Second, we must make certain that any advice that we provide is based on information that we have deemed appropriate and reliable. Finally, all of us must maintain records that clearly show that we met all of our obligations in regards to our investment advice and investment recommendations to our clients. These records are referred to as Disclosure Documents or Disclosures.
In terms of the Employment Practices Act it states that all employment practices must be in a non discriminatory manner. This means that an employer may not make hiring decisions based on race, color, nationality, religion, age, sex, or disability. Also, they may not ask questions about an applicant's citizenship status or require potential employees to falsify their immigration or legal records. An investment adviser who engages in illegal activities or engages in discrimination may be subject to disciplinary action or even be fired.
According to the Investment Adviser Law on Whistleblower, an investment adviser who brings forth false information or advice in the course of his or her professional duties may be subjected to criminal prosecution. In addition to being subjected to legal action, the person could also find themselves on the witness stand in a civil court proceedings. The law also provides an investment adviser who obtains private information for their own private purposes with a statutory duty to protect such information. For MAH Advising
, if an investment adviser breaks the law by trying to recruit clients using non-lawyers, they may face criminal fines and be required to pay damages. In some instances, the law on whistle blowing provides protection to the adviser as well as the client.
It should be noted however, that there are many instances in which the employment of an investment adviser may not necessarily be covered by the employment law on whistleblower. For example, an investment adviser may engage in trade in securities or futures but not be considered an investment adviser. In such cases, the person would need to have engaged in investment advising services for the employer or the entity for which they work for to be found fit to be an employment adviser. In addition, there are some professions such as the banking industry that do not require an investment adviser to have a law degree. This is due to the fact that the profession requires individuals to have certain attributes such as money management skills.