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The Investment Lawyer

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The Investment Company Act of 1940 (ICA) and the Investment Advisers Act of 1940 (IAA) prevent an investment adviser from contractually limiting liability to its advisees through three main routes: statutory anti-waiver prohibitions, the IAA’s anti-fraud provisions, and limitations on indemnification by registered investment companies of their investment advisers. This article focuses on one of these three areas, the IAA’s anti-fraud provisions, and specifically, the SEC’s expansive interpretations of those anti-fraud provisions to cover exculpatory “hedge clauses” – caveats or cautionary statements – by investment advisers purporting to limit their liability to their advisees.


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