IAR Agreements: What You Need to Know About This Important Document
If you`re in the financial services industry, chances are you`ve heard of an IAR agreement. But do you know what it is and why it`s important? In this article, we`ll break down the basics of IAR agreements so you can better understand this critical document.
What is an IAR Agreement?
An IAR, or investment adviser representative, is an individual who provides investment advice or manages client assets on behalf of a registered investment adviser (RIA). An IAR agreement is a contract between the IAR and the RIA outlining the terms and conditions of their relationship. This document is required by the Securities and Exchange Commission (SEC) for RIAs that have IARs working under them.
What Does an IAR Agreement Include?
At a minimum, an IAR agreement should specify the following:
– The scope of the IAR`s responsibilities
– Compensation and fee arrangements
– Confidentiality and non-disclosure provisions
– Termination and renewal procedures
– Regulatory compliance requirements
– Any other terms and conditions of the relationship
The agreement should also clearly state that the IAR is acting on behalf of the RIA and is subject to its policies and procedures.
Why is an IAR Agreement Important?
There are several reasons why an IAR agreement is important:
– Compliance: As mentioned, the SEC requires RIAs to have IAR agreements. Failure to comply with this regulation can result in penalties and fines.
– Protection: An IAR agreement protects both the RIA and the IAR by outlining the expectations and responsibilities of each party. It also helps to prevent misunderstandings and disputes.
– Clarity: The agreement clearly defines the scope of the IAR`s responsibilities and compensation arrangements, which can help to avoid confusion and disputes later on.
– Professionalism: Having a formal agreement in place adds a level of professionalism and credibility to the relationship between the RIA and the IAR.
In summary, an IAR agreement is a critical document that outlines the terms and conditions of the relationship between an RIA and its IARs. This document is required by the SEC and helps to ensure compliance, protection, clarity, and professionalism. If you`re an RIA or an IAR, it`s important to understand the basics of IAR agreements and to ensure that you have a detailed and legally binding agreement in place.