Investment Advisory Contracts

The primary relatonship between a client and an investment adviser is determined by an investment advisory contract.

• 1.  Contracts must be in writing under USA and written or oral under the IAA 1940.
• 2.  Under USA fees must be competitite while under IAA 1940 they must be reasonable.

• - services provided, including custody;
• - term;
• - amount of advisory fee or formula;
• - amount or formula of any prepaid fees to be refunded at contract termination.
• - granting of discretionary powers to IA or IARs or not;
• - contract is not assignable withou consent of the other party;
• - if a partnership, any change to a minority interest will be communicated to the client in a reasonable period of time. A change in majority partner is considered an assignment.

• When the client is a qualified client:
• - natural person or company entering into a contract with at least $750K($1MM in 2011)  in AUM;
• - natural person or company who the IA believes has over $1.5MM 9$2MM in 2011) in net worth less home equity (joint accounts count) or
• - natural person who is an officer or director of the IA or one of their IARs employed for at least 12 months.
• A fee based on average AUM over time is not considered to be a performance fee.

The most common type of performance fee, averaged over a period of at least 12 months with an increase or decrease in proportion to the investment performance in relation to an index usually the S&P.  IA must use net performance and the Administrator may authorize even when stated conditions are not met.

any direct or indirect transfer or pledge of an investment advisory contract by the IA or of a controlling block of the IA's outstanding voting securities by a stockholder of the IA.  If a partner dies or withdraws a minority interest or the IA admits one or more minority partners is not an assignment.  A reorganization whid does not affect control or management of an IA is not an assignment either.