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ASSET MANAGEMENT

Investment Advisors &
Financial Planners

Available in Arizona, Connecticut, Illinois, Massachusetts, Maryland, North Carolina, New Jersey, New York, Pennsylvania, Texas, and the District of Columbia

Asset Management: Investment Adviser & Financial Planners Professional Liability Insurance.

Investment Adviser Professional Services means:

  • Financial, economic, and investment advice rendered in the capacity of an Investment Adviser under a written contract.
  • Investment management services rendered as an Investment Adviser, including selecting and overseeing investment advisers, placement agents, research consultants, or other outside service providers.
  • Adherence to regulatory requirements for designing internal policies and procedures in the capacity of an Investment Adviser. 
  • The solicitation of actual or potential customers.
    • Investment management services rendered as a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, or any similar law.
  • Financial planning services include the following:(i) personal financial risk management; (ii) investment advice; (iii) estate planning; (iv) education planning; (v) retirement planning; and (vi) tax planning.

 

Professional liability exposures for investment advisors and financial planners primarily concern the risk of claims arising from their professional services. Exposures include:

  • Misjudgment or Mistakes: If an advisor makes an error in recommending investments or fails to provide appropriate advice based on the client’s needs and goals, they could be held liable.
  • Inadequate Disclosure: Failing to disclose potential conflicts of interest or risks associated with financial products can lead to liability issues.
  • Conflict of Interest: Advisors are often held to a fiduciary standard, meaning they must act in their clients’ best interests. If an advisor is found to have prioritized their interests or those of a third party over their client’s interests, they may face legal claims.
  • Negligence: If an advisor does not exercise the level of care expected in managing client investments or providing financial planning, they can be sued for negligence.
  • False Information: Providing misleading or false information about investments or financial products can lead to accusations of fraud.
  • Misleading Statements: Inaccurate projections or promises of returns can expose an advisor to misrepresentation claims. 
  • Ignoring Client Directives: If an advisor does not adhere to a client’s specific instructions or preferences, it can result in legal exposure.
  • Failure to Implement: Not taking appropriate actions promptly, based on the client’s directions or needs, can lead to claims. 
  • Violations of Laws: Investment advisors and financial planners must comply with various regulations (e.g., SEC, FINRA, state regulations). Violations can result in fines, sanctions, and lawsuits.
  • Recordkeeping Failures: Inadequate recordkeeping or failing to provide necessary documentation can also lead to regulatory and legal challenges.
  • Investment Performance: Clients who experience losses might sue if they believe those losses were due to poor advice or mismanagement.
  • Failure to Diversify: Claims can arise if an advisor fails to properly diversify a client’s portfolio properly, resulting in higher risk and potential losses.
  • Inadequate Communication: Poor or unclear communication about financial strategies, risks, or changes can lead to misunderstandings and subsequent liability.

Arbitration and Lawsuits: Advisors might face arbitration or litigation if clients dispute the advice or service provided. Regardless of the outcome, this can be costly and time-consuming.

Mitigation Strategies

To manage these risks, investment advisors and financial planners can:

  • Carry Professional Liability Insurance. This insurance (often called Errors and Omissions insurance) helps protect against claims of negligence or failure to perform duties.
  • Maintain High Standards of Care: Adhering to best practices, staying informed about regulations, and implementing robust compliance procedures can mitigate risks.

Document Everything: Comprehensive documentation of advice given, client communications, and decisions can provide crucial evidence in defense of claims.

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We will market your application to several insurance carriers.

PLEASE BE ADVISED:

Please be advised that the above titles, headings, definitions, terms, and descriptions are for illustrative purposes only and are not a contract. Please refer to the actual policy and all endorsements for a complete description of coverage, as certain Conditions & Exclusions apply.

APPLICATIONS

Submission Requirements for Arizona, Connecticut, Illinois, Massachusetts, Maryland, North Carolina, New Jersey, New York, Pennsylvania, Texas, and the District of Columbia

  1. Firm’s current letterhead.
  2. Fully completed, signed & dated Investment Adviser & Financial Planners Professionals Application
  3. Resumes of the firm’s key personnel (owners, partners & principals.)
  4. Claims Supplement for each claim or disciplinary action in the past five (5) years.
  5. Current Professional Liability Insurance Declarations Page &
    all material endorsements, including Prior Acts Endorsements.
  6. Signed and Dated NY Reg.194 for New York Applicants.

Very Important. Coverage cannot be bound until all required documentation and the premium due are received, reviewed, and accepted by Underwriters. Coverage cannot be back-dated, so please ensure your information is submitted on time. All submissions are individually underwritten to determine program eligibility and terms.

Please email or fax completed forms to: newbusiness@plcsi.com

Questions? Phone: (914) 592-6505

Fax to: (914) 592-6508

Address: 45 Knollwood Rd, Suite 202, Elmsford, NY 10523

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PLCSI-IM-Directors-Officers-Liability-P1

Attorneys and law firms face several professional liability exposures, including:

Negligence: Failing to meet professional standards or deadlines, including not conducting proper legal research, missing filing deadlines, failing to advise clients appropriately, giving incorrect or incomplete legal advice, and lacking due diligence in reviewing legal documents or contracts.

Conflict of Interest: Representing clients with conflicting interests, such as multiple clients with adverse positions or personal interests that interfere with professional duties, and failure to disclose conflicts or obtain proper consent from all affected parties.

Breach of Confidentiality: Disclosing client confidence or sensitive information without proper authorization and failing to protect client information, especially in the digital age.

Failure to Supervise: Failure to properly supervise associates, paralegals, or other employees leads to errors or omissions and inadequate oversight of subordinates’ work, especially in cases involving complex legal issues.

Fraud or Misrepresentation: Making false representations or failing to disclose material facts that could influence a client’s decision or the case outcome and engaging in fraudulent conduct or misusing client funds.

Incompetence: Taking on cases outside one’s expertise or failing to provide competent legal representation and not staying updated on changes in law or legal procedures relevant to a case.

Client Relations and Communication: Poor communication with clients leads to misunderstandings, dissatisfaction, or loss of trust, as well as failure to provide updates, manage client expectations, or adequately explain legal terms or processes.

Failure to File or Meet Deadlines: Missed filing deadlines, court dates, or failure to comply with procedural requirements can lead to negligence and malpractice claims. In cases involving statutes of limitations, missing deadlines can be particularly problematic.

Litigation Strategy and Decision-making: Poor strategic decisions in litigation include taking unwarranted risks, failing to pursue meritorious claims, and misjudging the likelihood of success or settlement opportunities.

Client Mismanagement: Failing to manage the client’s legal affairs organizationally, resulting in economic loss, penalties, or legal consequences.

Conflict with Third Parties (e.g., opposing counsel, courts): Claims may arise from mishandling interactions with third parties, such as opposing counsel or the courts, which may harm a client’s interests.

Alleged Violation of Ethical Standards: Claims arising from perceived violations of the professional code of ethics, such as misconduct, dishonesty, or breaches of fiduciary duties.

The above exposures highlight the complex nature of legal work and the importance of maintaining high professional standards, staying informed about legal developments, and ensuring effective client communication and management. Legal malpractice claims can arise from minor oversights, so adequate professional liability coverage is crucial for all practicing attorneys.