Securities Broker-Dealer E&O & Investment Advisors (RIA) E&O

There is no industry more impacted by constantly changing regulations and the ever evolving legal landscape that surrounds it more than the financial sector. Compliance is a constant challenge. And in few industries are the consequences for non-compliance, breaches, errors, and improper suitability more severe - litigation alone for resulting client damages can be extremely costly, lengthy, and brand damaging. For advisors and broker-dealers, securing well structured professional liability insurance is more important than ever in light of recent trends: 

  • More investors are requiring it
  • SEC is targeting smaller advisors & PE/VC firms
  • SEC is increasing it's cyber-security oversight
  • DOL (Department of Labor) is imposing new fiduciary standards
  • Funds are expanding to include board representation and outside directorship seat

If you are a PE/VC firm, hedge fund, investment advisor, fin-tech lender, or securities broker-dealer, partnering with an experienced professional liability broker to create a properly aligned E&O/D&O portfolio through a strong insurer is the first step to financial risk mitigation. Through an individualized approach, we carefully evaluate our clients' organizational structure, its unique needs and goals and structure insurance programs that provide the best solution. Thorough program audits are especially important when placing financial E&O, as coverage can often range from basic policies with multiple carve outs (which provide little value) to broad policies that provide a great level of protection through expanded terms and conditions with key endorsements. There are also many details hidden in the terminology and verbiage which require careful negotiation. These seemingly small verbiage changes can have significant coverage implications and mean the difference between a covered and un-covered claim. Among the questions that advisors and broker-dealers should ask:

  • Does the policy include coverage for regulatory/administrative proceedings or investigations?
  • Does the contractual exclusion contain a carve-back for negligence or "professional service failures"
  • Is "Cost Of Corrections Coverage" included for trade errors? Can it be added?
  • Does the policy contain a late trading, soft dollar or market timing exclusion? Can it be removed?
  • Does the policy exclude coverage for claims brought BY clearing agents and brokerage firms? 
  • Does the policy exclude coverage for fee disputes?
  • Does the policy affirmatively provide coverage for all products & services being offered? Special attention should be given to (among other investment products): discretionary trading, penny stocks, hedge fund investments, asset backed securities, and financial planning.

While many of these negotiations can carry little to no additional premium, if you don’t ask you won’t receive, which is why it is important to partner with an experienced broker. As an independent brokerage with an emphasized focus on professional and management liability, we leverage our experience to assist investment advisors/managers, venture capital firms, financial consultants and community banks through:

  • Market saturation to achieve competitive pricing
  • Coverage audits and analysis to assist with policy comparisons and coverage coordination
  • Negotiation of coverage terms, clauses and verbiage
  • Claims Include
    • Trading and Processing Errors
    • Market Timing & timing errors
    • Negligence
    • Breach of duties
    • Mis-management 
    • Misrepresentations made in PPM's & undisclosed investment strategies
    • Failure to disclose/advise/invest
    • Allegations of Fraud
    • Conflicts of interest
    • Fee Disputes
    • Delinquent filing
    • insider trading
  • Claimants Include
    • Investors
    • Employees
    • Competitors
    • Partners
    • Portfolio companies
    • Regulators
    • Bankruptcy Trustees
  • Coverages & Endorsements
    • Side C (Entity) coverage inclusive of all entities 
    • Cost Of Corrections Coverage
    • Coverage for regulatory/administrative proceedings and investigations
    • Broad definition of "professional services" inclusive of all products and services being offered
    • Broad definition of "claim" and "wrongful act"
    • Softened hammer (consent to settle) clause
    • Removal of "late trading, soft dollar and market timing" exclusions
    • Removal of any "fee dispute" exclusions
    • Carve-back for "negligence" or "professional service failures" to the contractual exclusion
    • Application and exclusion severability
    • Foreign Service Of Suit Clause requiring coverage issues be adjudicated abroad (to be avoided)
    • ODL (outside directorship liability)
    • Priorty of payments clause in favor of broker/dealers or advisors
    • Broad bankruptcy carve-backs
    • EPLI (employment practice liability)
    • Crime/Fidelity coverage

Get (Risk) Managed.

Ready to review your existing insurance program? Interested in setting a reminder for a renewal review? Or simply have a question? We're here to help. We also understand you're busy - let's schedule a time to speak that works best for you. Simply schedule a call and we'll reach out when it's convenient.

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