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Custodial Firm Not Liable for RIA's Alleged MisManagement

By Mark H. Astarita, Esq.

Clearing firms, those entities which perform back office, bookkeeping, accounting, custodian and record-keeping functions for other broker-dealers, hedge funds and investment advisers, are not liable for the investment losses of their client's customers. That has been clear for quite some time, and really isn't in dispute.The outcome makes sense. Firms like Fidelity and Schwab are not in direct contact with the customers of the firms and RIAs that they carry accounts for, they do not make decisions in the account, and are not the party providing investment advice. They are not compensated for selling securities, or for giving advice, and have no responsibility for the investments, or the advice that the broker or investment adviser provides...continue to full post

Full post as published by SECLaw.com on January 12, 2010 (boomark / email).