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State of Wisconsin
Strengthening Wisconsin's Financial Future
Department of Financial Institutions |
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Investment Adviser Guide Home De
Minimis Exemption 
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ContractsUPDATED FOR CHANGES EFFECTIVE JANUARY 1, 2000 Each investment adviser should create its own contract which addresses the business needs of the adviser. The Division of Securities does not have a standard contract because of the variety of services and requirements among advisers. However, § DFI-Sec 5.05(2), Wis. Adm. Code, sets out requirements for investment advisory contracts. Perhaps the most significant is the requirement in § DFI-Sec 5.05(8), Wis. Adm. Code, that all contracts be in writing. The Act is silent on the form of a contract, allowing it to be either oral or written. However, all contracts with Wisconsin customers must be in writing. The written contract requirement applies to all types of advisers, including fee-only planners or those providing services on demand. The Code sets forth other requirements for all contracts: The terms of the advisory agreement must set forth what services the adviser will provide under the contract and may itemize specific services that are not included. The fee schedule applicable to the account must be clearly set forth, including how the fee is calculated, how and when it is collected, and the formula for determining the amount of prepaid fees to be returned upon early termination of the contract. Asset-based advisory fees cannot be calculated on portfolio performance except for certain types of accounts. A provision that the contract cannot be assigned to another adviser without the written consent of the client must be included. If discretionary or trading authority is being granted to the adviser, the extent of such authority must be detailed. The client cannot be required to waive any rights under Wisconsin Statutes or rules. In a situation where a husband and wife have jointly entered into an agreement with an investment adviser and have joint and individual (including custodial) accounts under management, separate contracts will not be required. Advisers must provide the client with a copy of all contracts within 20 days of signing (§ DFI-Sec 5.05(5), Wis. Adm. Code). |
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