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Investment Advisers Act of 1940: Difference between revisions
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The Investment Advisers Act makes it unlawful for any investment adviser acting as principal, knowingly to sell any security to or purchase any security from a client without disclosing the capacity in which he is acting and obtaining the client’s consent. Because of the practical difficulties of compliance on a trade-by-trade basis, firms tend to simply refrain from engaging in principal trading with their advisory clients. | The Investment Advisers Act makes it unlawful for any investment adviser acting as principal, knowingly to sell any security to or purchase any security from a client without disclosing the capacity in which he is acting and obtaining the client’s consent. Because of the practical difficulties of compliance on a trade-by-trade basis, firms tend to simply refrain from engaging in principal trading with their advisory clients. | ||
Where advisers trade as a principal and on behalf of their clients with the same Broker-Dealer, a technical issue may arise where the Broker crosses buy orders and sell orders, something it may do systematically (see [[systematic internalisation]]. | Where advisers trade as a principal and on behalf of their clients with the same Broker-Dealer, a technical issue may arise where the Broker crosses buy orders and sell orders, something it may do systematically (see [[systematic internalisation]]. | ||
===See Also=== | |||
*[[riskless principal]] | |||
*[[systematic internalisation]] | |||
The key issue is ensuring our crossing engine can be pre-configured not to cross between certain accounts. | The key issue is ensuring our crossing engine can be pre-configured not to cross between certain accounts. | ||