Professional Liability (E&O)

Financial firms operate in a high-risk environment. Simple trading errors can result in significant financial losses and even when acting in a client’s best interest, poor performing investments may give rise to lawsuits which may allege clients were misled, investments were unsuitable, or the broker/advisor failed to diversify investments. Even frivolous lawsuits can be costly to defend against. The regulatory environment is also becoming more challenging with compliance failures more likely and individual accountability on the rise. Additionally, there are a number of factors increasing, or shifting the risk(s) encountered by advisors and broker dealers:
 

• “Regulation Best Interest” continues to fuel regulatory actions and investor lawsuits alleging poor investment advice, conflicts of interest, diligence failures and mismanagement.
• While the number of SEC Enforcement actions in 2025 have decreased from the prior year, FINRA enforcement actions have increased slightly, with its focus shifting from fines to restitution.
• Artificial Intelligence is also creating emerging risks as more and more firms adopt the use of artificial systems. A handful of suits have already been brought against RIA’s and Broker Dealers involving inadequate disclosures. Exclusions pertaining to the use of artificial systems are also beginning to emerge on insurer’s policy forms, underscoring the importance of careful policy reviews when placing or renewing insurance.
• Broker dealers that promote social media content produced by finfluencers (financial influencers) can become subjected to regulatory scrutiny and potential fines, particularly when influencers are compensated and/or the content is misleading or fail to disclose associated risk.
• The large number of mergers and acquisitions amongst RIA’s and Broker Dealers is resulting in M&A related litigation involving advisor poaching, theft of clients and trade secrets, and valuation disputes.
• Litigation funding is fueling claim activity against brokers and advisors, increasing both the number of claims, and litigation costs.
   

If you are an investment advisor, securities broker-dealer, or investment bank, securing a well-structured E&O/D&O portfolio is the first step to financial risk mitigation. Ideally this should be placed with an insurer that maintains a good claims reputation, alongside an experienced professional liability broker, who play a critical role in structuring coverage. Insurance policies for broker dealers and investment advisors are highly specialized with terms that can vary greatly. In addition to accessing competitive markets, seasoned brokers perform necessary coverage audits and coverage negotiations to ensure coverage terms are favorable and properly aligned with the firm’s operations. Specialized brokers play an equally critical role during claims, ensuring that reporting obligations are not jeopardized, understanding when to tail coverage, and when and how to dispute claim any claim declinations that may be encountered.

While pricing will always play a role when making policy purchase decisions, it’s important not to place premiums ahead of broad policy terms. Policies with lower premiums will often contain numerous exclusions and restrictive terms, whereas policies with broader terms will often carry marginally higher premiums, and potentially higher retentions. Before placing any coverage, here are some important considerations:
 

• Is the policy properly covering all of the products being offered? Many policies will contain exclusions for penny stocks, private placements, late trading, selling away and market timing (among others), which can often be included per request (sometimes subject to separate terms and premium).
• If you’re an investment bank, is the policy covering services such as valuations and fairness opinions, as there are often excluded by default. For more coverage considerations specific to investment banks, please see our recent guide addressing coverage recommendations for investment banks. 
• Are all entities being properly covered? Some investment firms may have a holding company or parent entity with different subsidiaries providing advisory and/or broker-dealer services.
• Is coverage provided for both investment advisor reps and registered reps?
• How broad is the policy’s fraud exclusion. With fraud being a common allegation against financial firms, it’s critical to understand how the policy will respond. Some policies outright exclude any costs associated with fraud claims (including defense costs), whereas others only preclude settlements upon a final adjudication of guilt. It’s also important to ensure the policy’s exclusions contain severability agreements, preserving coverage for innocent insureds, something not all policies contain.
• Does the policy include coverage for regulatory/administrative proceedings or investigations? How broad is the regulatory coverage? Is it sub-limited?
• Does the contractual exclusion contain a carve-back for negligence or "professional service failures"
• Is coverage included for claims involving “failure to supervise”? According to FINRA’s 2025 arbitration data, supervisory failures are the 4th leading complaint
• Does the policy contain an exclusion for trade-errors? Is coverage included for costs associated with correcting recognized trading errors?
• Some policies contain laundry lists of excluded product/entities/individuals, precluding coverage for any claims involving any of the named parties. Has this list been thoroughly reviewed to ensure it does not create coverage complications for the firm?
• When registered reps are being covered by a broker-dealers E&O policy, is coverage truly being extended to cover all reps? Are there separate policy terms limiting coverage for those individuals? Do the reps understand the potential coverage issues of being covered by a group sponsored plan?
   

With an individualized approach, GB&A carefully evaluates our clients' organizational structure, its unique needs and goals and structures insurance programs that provide the best solution, through:
 

• Market saturation – with access to ~ 90-95% of the insurers writing coverage for registered investment advisors and broker dealers, we are able to thoroughly market accounts while performing coverage and premium comparisons.
• Carefully tailored coverage audits – allowing us to carefully assess policy terms.
• Securing coverage enhancements – coverage determinations are often hidden in the policy details. Seemingly small verbiage changes can have significant coverage implications. Whether it be securing coverage for punitive damages (where insurable) or negotiating appropriate carve backs to key exclusions, our coverage negotiations help policyholders maximize their coverage without increasing premiums.