Registered investment advisers ("RIAs") commonly engage accountants, attorneys, banks, broker-dealers and other third parties to solicit new investment advisory clients on the RIA’s behalf. Rule 206(4)-3 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”), provides requirements that must be met in order for a RIA to pay a solicitor who in exchange for compensation directly or indirectly, solicits any client for or refers any client to the RIA. Under this Rule, the solicitor-RIA relationship must be evidenced by a written agreement. Accordingly, RIAs that engage solicitors should be sure to enter into a written agreement which:
- Describes the solicitor’s activities and compensation for those activities;
- Requires the solicitor to adhere to the RIA’s instructions and the Advisers Act; and
- Requires the solicitor to provide the solicited client with a copy of the RIA’s client disclosure brochure, Form ADV Part 2, and a separate solicitor disclosure statement.