Performance Guarantees

What this video covers

• Why guaranteeing a client against loss is always unlawful, with zero exceptions for wealthy or sophisticated clients
• How promising a specific rate of return, promising to "make the client whole," or calling a security "risk-free" all masquerade as illegal guarantees
• What written authorization is required for an agent to share in a customer's account profits or losses, and why unauthorized sharing is the violation
• How authorized account sharing (a broker-dealer agent topic with dual written consent) differs from performance-based fees (an investment adviser compensation topic allowed only for qualified clients)
• What a hedge clause is and why the Securities and Exchange Commission (SEC) views overly broad hedge clauses as potentially fraudulent
• Why an adviser cannot contract away fiduciary duty, and why clauses disclaiming liability for negligence mislead clients about their legal rights