So cautions Richard Chen:
The SEC is taking aim at investment advisory contracts between the adviser and its clients, and many advisers may need to amend those contracts in light of the staff’s recent guidance where it takes the position that certain contract provisions designed to protect the adviser from liability constitute so-called “hedge clauses” that raise confusion as to whether the client is waiving its right to take action against an adviser provided under federal or state laws. The types of provisions can vary, but the SEC is particularly focused on claims where an adviser disclaims liability for its acts or omissions other than those that result from its gross negligence, willful misconduct, or bad faith.
