SEC Proposes Interpretation of Standard of Conduct for Investment Advisers

by Morgan Lewis
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Morgan Lewis

This LawFlash describes the key questions raised by the US Securities and Exchange Commission’s new proposed interpretation of the standard of conduct for investment advisers and discusses its potential impact on the existing interpretation of fiduciary duty.

As described in our prior LawFlash, the US Securities and Exchange Commission (SEC) recently voted to propose an interpretation of the standard of conduct for investment advisers under the Investment Advisers Act of 1940 (Advisers Act).[1] The proposed interpretation is part of a package of proposed rulemaking and interpretative guidance on the standards of conduct for broker-dealers and investment advisers.[2] Rather than adopt a uniform standard of conduct that would apply equally to investment advisers and broker-dealers when providing advice to retail investors, the SEC retained two standards in recognition of the differences in the types of relationships that broker-dealers and investment advisers have with their clients and different models for providing advice. The SEC proposed a new best interest standard for broker-dealers (Regulation Best Interest) and separately proposed this interpretation, which seeks to “reaffirm” and “clarify” certain aspects of the fiduciary duty an investment adviser owes to its clients.

The SEC’s proposed interpretation raises many questions about the ongoing applicability of longstanding interpretations of an investment adviser’s fiduciary duty under Section 206(1) and (2) of the Advisers Act. Some of the key questions raised by the proposed interpretation include:

  • Does the SEC’s interpretation of Section 206(1) and (2) remain grounded in common law concepts of fraud, or is the SEC seeking to define fraud more broadly – which the SEC can do by rule under Section 206(4)?
  • Under the common law, an adviser’s obligation to act in the client’s best interest is part of the duty of loyalty – is the SEC establishing new obligations for investment advisers by creating an overarching obligation to act in the client’s best interest (separate and apart from the duty of loyalty) or by interpreting the duty of care as also including a best interest obligation?
  • What is the impact on longstanding principles under the Advisers Act and common law that the scope of an investment adviser’s fiduciary duties depends on the extent of the adviser’s authority and the client’s reliance on the adviser?
  • Are there instances in which disclosure alone is not enough to satisfy the duty of loyalty? If so, what types of conflicts cannot be addressed through disclosure and must be avoided?
  • Are the SEC’s statements about the need for specificity in conflict disclosure and the use of “may-based” disclosure supported under the common law?
  • Does the proposed interpretation create an obligation for investment advisers to collect specific information and implement practices similar to the “know-your-customer” and suitability requirements applicable to broker-dealers?

In addition to the proposed interpretation, the SEC has also requested comments on whether to require investment advisers to satisfy federal licensing and continuing education requirements, provide account statements to clients, and meet financial responsibility requirements. Below we summarize the Staff’s proposed interpretation, and provide our observations on the practical implications. We also highlight areas where investment advisers would benefit from additional clarity from the SEC, both as to how this interpretation impacts existing practices and how it compares to the proposed standard of conduct for broker-dealers under Regulation Best Interest.

Investment Adviser Standard of Conduct

The proposed interpretation would affirm the SEC’s longstanding position that Section 206(1) and (2) of the Advisers Act establish a federal fiduciary standard governing the conduct of investment advisers.[3] As described in the proposed interpretation, an investment adviser’s fiduciary duty under the Advisers Act is based on common law principles and includes a duty of loyalty and a duty of care. While the proposed interpretation would reinforce that an adviser’s obligations will vary among clients based on the contours of a particular advisory relationship and as agreed upon with the client by contract, the SEC stated that “the relationship in all cases remains that of a fiduciary to a client” and that an adviser “cannot disclose or negotiate away, and the investor cannot waive, the federal fiduciary duty.”[4]

It is important to note that the proposed interpretation would apply to all investment advisers – including those providing advice to institutional investors and pooled investment vehicles such as mutual funds and private funds. Unlike Regulation Best Interest, which is focused exclusively on advice provided to retail investors, the proposed interpretation does not differentiate between advice provided to retail and institutional clients.

Proposed Interpretation of the Duty of Care

The proposed interpretation seeks to clarify an investment adviser’s duty of care in the context of personalized advice[5], and focuses specifically on the duty to

  • provide advice that is suitable for and in the best interest of the client;
  • seek best execution of client transactions where an adviser has the responsibility to select executing broker-dealers; and
  • provide advice and monitoring over the course of the relationship.

An investment adviser’s duty of care extends to all services provided on a client’s behalf. For purposes of the proposed interpretation, however, the SEC has emphasized only the three areas noted above.

Duty to Provide Advice that Is Suitable and in the Best Interest of the Client

According to the SEC, an investment adviser is required “to make a reasonable inquiry into a client’s” investment profile, including the client’s “financial situation, level of financial sophistication, investment experience, and investment objectives,” and “provide personalized advice that is suitable for and in the best interest of the client based on the client’s investment profile.”

  • The proposed interpretation would require an investment adviser to make a reasonable inquiry into a client’s investment profile before providing any “personalized” investment advice, and as appropriate thereafter.[6] According to the SEC, this inquiry would turn on what is reasonable under the circumstances, including the nature and extent of the advisory services to be provided, the nature and complexity of the advice, and the client’s investment profile. While, as a general matter, investment advisers already require retail clients to complete investor questionnaires (or similar forms) in advance of the provision of advice in many contexts, the SEC’s comments call into question whether advisers will be expected to adopt more robust practices in their onboarding processes to ensure that the adviser captures and analyzes the sufficient client information in order to provide appropriate investment advice.
  • In addition, the SEC stated that an investment adviser would be required to “update a client’s investment profile in order to adjust its advice to reflect any changed circumstances,” except advice that is not provided on an ongoing basis, such as providing a one-time financial plan. The SEC explained that the frequency with which an investment adviser must update a client’s investment profile and adjust its advice to reflect any changed circumstances would turn on a number of factors, including the extent to which the adviser is aware of events that could render the client’s investment profile inaccurate or incomplete. Indeed, investment advisers in the separate account space generally have at least annual touchpoints with clients in order to, among other things, assess whether the client’s financial circumstances have changed. The SEC’s statements, however, suggest that an adviser may need to make this assessment on a more frequent periodic basis or ad hoc basis in response to outside events that could impact clients, including changes in law or the employment or marital status of the client. This would cause a shift in practice for many investment advisers, particularly in cases where clients are contractually required to inform the adviser should their financial circumstances change, and could create practical and operational challenges.
  • Under the proposed interpretation, an investment adviser would be required to “have a reasonable belief that the personalized advice is suitable for and in the best interest of the client based on the client’s investment profile.”[7] The SEC stated that whether personalized advice is in a particular client’s best interest must be evaluated taking into account the client’s investment profile and the client’s portfolio that the adviser manages. In addition, the SEC believes that the cost associated with advice “would generally be one of many important factors” to consider, and that “the fiduciary duty does not necessarily require an adviser to recommend the lowest cost investment product or strategy.” Notwithstanding this general statement, the SEC went on to state its belief that “an adviser could not reasonably believe that a recommended security is in the best interest of a client if it is higher cost than a security that is otherwise identical, including any special or unusual features, liquidity, risks and potential benefits, volatility and likely performance.” For example, advising a client to purchase a more expensive mutual fund share class when the adviser receives compensation that creates a potential conflict and reduces the client’s return may violate the adviser’s fiduciary duty and the antifraud provisions of the Advisers Act, if the adviser “does not, at a minimum, provide full and fair disclosure of the conflict and its impact on the client and obtain informed client consent to the conflict.”

Duty to Seek Best Execution

The proposed interpretation reconfirms an investment adviser’s duty to seek best execution of client transactions where the adviser has the responsibility to select executing broker-dealers for the transactions. The proposed interpretation would provide that the duty to seek best execution requires an investment adviser to seek to obtain execution of transactions for each client such that the client’s total cost or proceeds in each transaction are the most favorable under the circumstances.[8] According to the SEC, “the determinative factor is not the lowest possible commission cost but whether the transaction represents the best qualitative execution,” and that advisers should periodically and systematically evaluate execution quality.

The proposed interpretation does not appear to change existing standards for best execution. Interestingly, despite having brought charges against investment advisers for failure to obtain best execution in the context of mutual fund share class selection in a number of settled enforcement actions,[9] the SEC did not state that an investment adviser’s duty to seek best execution requires selection of the lowest cost share class. We believe the fact that the SEC did not address this issue supports the argument that best execution should not apply to mutual fund share class selection. Under longstanding SEC interpretation, an investment adviser’s duty to seek best execution is focused on broker selection, and not to the sale of mutual funds or other investment products that trade at the applicable public offering price. Moreover, the application of the duty to seek best execution has always included consideration of a range of quantitative and qualitative factors that is not limited solely to cost or price. The best execution claims in settled enforcement actions, in contrast, focus exclusively on whether the adviser offered the lowest cost share class.

Duty to Provide Ongoing Advice and Monitoring

The proposed interpretation would also require that an investment adviser “provide advice and services to a client over the course of the relationship at a frequency that is both in the best interest of the client and consistent with the scope of advisory services agreed upon between the investment adviser and the client.” The SEC stated that this duty is particularly important in ongoing relationships with a client, but “may be relatively circumscribed” where the adviser and client have agreed by contract to limit the duration of the relationship. According to the SEC, the duty would extend to all personalized advice, “including an evaluation of whether a client’s account or program type (for example, a wrap fee program account) continues to be in the client’s best interest.”

Proposed Interpretation of the Duty of Loyalty

The proposed interpretation would reinforce the existing standard that “[t]he duty of loyalty requires an investment adviser to put its client’s interests first.” The SEC stated that this means an adviser has “an obligation not to subordinate its clients’ interests to its own,” whether by favoring its own accounts or favoring certain clients over others (e.g., those paying higher fee rates). For example, in allocating investment opportunities, the SEC believes an adviser must treat all clients fairly – namely “that an adviser’s allocation policies must be fair and, if they present a conflict, the adviser must fully and fairly disclose the conflict such that a client can provide informed consent.”

The SEC also believes that “[a]n adviser must seek to avoid conflicts of interest with its clients, and, at a minimum, make full and fair disclosure to its clients of all material conflicts of interest that could affect the advisory relationship.” According to the SEC, the disclosure must be clear and detailed enough and contain sufficiently specific facts to allow the client to make a reasonably informed decision whether to consent to the conflicts. In this regard, the SEC stated that “an adviser disclosing that it ‘may’ have a conflict is not adequate disclosure when the conflict actually exists.”

The proposed interpretation also discusses when an investment adviser can infer or accept client consent to a conflict. In particular, the SEC states that an adviser would violate its fiduciary duty if it infers or accepts consent to a conflict where “(i) the facts and circumstances indicate that the client did not understand the nature and import of the conflict, or (ii) the material facts concerning the conflict cannot be fully and fairly disclosed.”[10] According to the SEC, this could involve conflicts for which disclosure cannot “adequately convey[] the material facts or the nature, magnitude and potential effect of the conflict” or disclosure that is not specific enough to allow clients to understand whether and how the conflict will affect the advice they receive. The SEC expects that, in these instances, the adviser would eliminate the conflict or adequately mitigate the conflict so that it can be more readily disclosed.

In addition, the SEC asserts that disclosure alone might not be enough to satisfy the duty of loyalty and Section 206 of the Advisers Act. Importantly, however, the SEC does not describe situations where disclosure is not sufficient and it is not clear whether the SEC is saying that certain conflicts constitute a per se breach of fiduciary duty and must be eliminated, or whether it is saying that such conflicts may stand if the adviser takes additional steps to mitigate the conflict, in addition to providing appropriate disclosure. Of course, under common law the duty of loyalty does not prohibit an investment adviser from benefitting from a transaction with a client if the investment adviser provides appropriate disclosure of the conflicts of interest related to the transaction and the client consents.[11] A client may generally consent to a conflict of interest that would otherwise constitute a breach of the duty of loyalty where the adviser has provided appropriate disclosure of the conflict.[12]

The SEC’s assertion that disclosure alone may not be enough to satisfy the duty of loyalty has a potentially significant impact for advisers to both retail and institutional clients. In particular, suggesting that disclosure is not a sufficient mechanism to address conflicts of interests would cause widely adopted practices to be called into question. To the extent the SEC’s proposed approach to disclosure is inconsistent with common law principles, it will also cause a disconnect between SEC and non-SEC fiduciaries (like banks, trust companies, etc.) that provide fiduciary advice in a coordinated way such as through delegation or dual hatting arrangements.

Comparison to Regulation Best Interest

The following chart summarizes the key differences between the interpretation of a broker-dealer’s obligations under Regulation Best Interest and an investment adviser’s obligations under the federal fiduciary standard, as articulated in the proposed interpretation.

Obligation or Application

Regulation Best Interest

Investment Adviser Interpretation

Scope of Proposed Rule/Interpretation

Applies to broker-dealers when making a recommendation of any securities transaction or investment strategy to a retail customer

Applies to investment advisers when providing personalized advice (not limited to interactions with retail investors)

Covered Persons

Expressly covers the broker, dealer or a natural person who is an associated person of a broker or dealer

Applies to investment adviser firm; does not expressly reference supervised persons

Overall Standard of Conduct

Best Interest Obligation – To act in the best interest of the retail customer at the time the recommendation is made without placing the financial or other interest of the broker, dealer, or a natural person who is an associated person of a broker or dealer making the recommendation ahead of the interest of the retail customer

Financial interests cannot be the predominant motivating factor behind the recommendation

Fiduciary Duty – Fiduciary duty is not specifically defined in the Advisers Act or the rules thereunder, but comprises a duty of care and a duty of loyalty

Duty of Loyalty

   

Disclosure of Conflicts of Interest

Prior to or at the time of the recommendation, the broker, dealer, or associated person must reasonably disclose to the retail customer, in writing, the material facts relating to the scope and terms of the relationship with the retail customer and all material conflicts of interest that are associated with the recommendation

Full and fair disclosure to clients of all material conflicts of interest that could affect the advisory relationship

Limitations of Disclosure

Broker-dealers must establish, maintain, and enforce written policies and procedures reasonably designed to (1) identify and at a minimum disclose or eliminate all material conflicts of interest that are associated with recommendations; and (2) identify and disclose and mitigate or eliminate material conflicts of interest arising from financial incentives associated with recommendations

Disclosure of a conflict alone is not always sufficient to satisfy the adviser’s duty of loyalty

If disclosure and informed consent is insufficient, an adviser should eliminate the conflict or adequately mitigate the conflict so that it can be more readily disclosed

Specificity and Timing of Disclosure and Informed Consent

Disclosure would need to give sufficient information to enable a retail customer to make an informed decision with regard to a recommendation

The timing of the disclosure is critically important – investors should receive information early enough in the process to give them adequate time to consider the information and promote the investor’s understanding in order to make informed investment decisions, but not so early that the disclosure fails to provide meaningful information

Disclosure must be clear and detailed enough for a client to make a reasonably informed decision to consent to such conflicts and practices or reject them

Disclosure that an adviser “may” have a conflict is not adequate disclosure when the conflict actually exists

Not appropriate for an adviser to infer or accept client consent to a conflict where either (1) the facts and circumstances indicate that the client did not understand the nature and import of the conflict; or (2) the material facts concerning the conflict could not be fully and fairly disclosed

Duty of Care

   

Best Interest of Recommendations

The broker, dealer, or natural person who is an associated person of a broker or dealer, in making the recommendation must exercise reasonable diligence, care, skill, and prudence to have a reasonable basis to believe that:

(A) the recommendation could be in the best interest of at least some retail customers;

(B) the recommendation is in the best interest of a particular retail customer based on that retail customer’s investment profile; and

(C) a series of recommended transactions is not excessive and is in the retail customer’s best interest when taken together in light of the retail customer’s investment profile

The duty of care includes a duty to make a reasonable inquiry into a client’s investment profile and to provide personalized advice that is suitable for and in the best interest of the client based on the client’s investment profile

An adviser must update a client’s investment profile in order to adjust its advice to reflect any changed circumstances

Standard requires the adviser to conduct a reasonable investigation into the investment sufficient to not base its advice on materially inaccurate or incomplete information

Duty to Seek Best Execution

Not specifically addressed in Regulation Best Interest, but subject to applicable SRO requirements

Adviser must seek to obtain the execution of transactions for each of its clients such that the client’s total cost or proceeds in each transaction are the most favorable under the circumstances

Adviser should “periodically and systematically” evaluate the execution it is receiving for clients

Duty to Provide Ongoing Monitoring

Not applicable. Broker-dealers have a transactional obligation that applies at the time of a recommendation

Adviser has an obligation to provide advice and monitoring over the course of the client relationship to the extent consistent with terms of the client relationship

The duty to monitor extends to all personalized advice an adviser provides to the client, including the recommendation of a particular account or program type

Request for Comment on Areas of Enhanced Investment Adviser Regulation

The SEC also requested comment on three areas of potential additions to the regulatory regime for SEC-registered investment advisers. The areas identified were also discussed in the SEC Staff’s 2011 Study on Investment Advisers and Broker-Dealers conducted pursuant to Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.[13]

Federal Licensing and Continuing Education

The SEC requested comment on whether there should be federal licensing and continuing education requirements for personnel of SEC-registered investment advisers. In requesting comment, the SEC noted that associated persons of broker-dealers are required to meet qualification requirements under Financial Industry Regulatory Authority (FINRA) rules and most states impose registration, licensing, or qualification requirements on investment adviser representatives with a place of business in the state. The SEC requested comment on, among others: whether to require licensing and continuing education for personnel of advisers; which advisory personnel should be covered by the requirements; how the requirements should be structured, and whether there should be any specific minimum qualifications; how to avoid possible duplication with other regulatory regimes; and whether the SEC should play a role in registering investment adviser representatives.

Provision of Account Statements

The SEC also requested comment on whether to propose rules requiring investment advisers to provide account statements. Although many advisory clients already receive account statements from custodians pursuant to Advisers Act Rule 206(4)-2 and Rule 3a-4 under the Investment Company Act of 1940, investment advisers are not currently required to provide clients with account statements under the Advisers Act. The SEC stated its belief that periodic account statements that specified the dollar amounts of fees and expenses would allow clients to understand and evaluate the cost of the services they are receiving from an investment adviser. The SEC requested comment on, among others: whether clients would benefit from a requirement that they enter into a written agreement with advisers specifying the fees and expenses to be paid before they receive any advice; what information beyond fees and expenses would be most useful for retail clients to receive in account statements; and the frequency with which clients should receive such account statements.

Financial Responsibility

Finally, the SEC requested comment on whether SEC-registered investment advisers should be subject to a financial responsibility program similar to those that apply to broker-dealers. Broker-dealers are required to meet minimum net capital requirements; ensure customer assets are readily available to be returned to customers should the broker-dealer fail; complete an annual audit and make audited balance sheets available to customers; and become members of the Securities Investor Protection Corporation. In comparison, SEC-registered investment advisers are not subject to any net capital requirements, although they are required to disclose any material financial condition that impairs their ability to provide services to clients. The SEC noted that many advisers have relatively small amounts of capital; in the event of serious fraud, the adviser’s assets are often insufficient to compensate clients for their loss; and are not required to obtain fidelity bonds. The SEC requested comment on, among others: whether Advisers Act Rule 206(4)-2 (the Custody Rule) and other rules adequately address the potential for misappropriation of client assets; whether advisers should be subject to annual audit or fidelity bonding requirements; the frequency and severity of client losses due to advisers’ inability to satisfy a judgment or compensate a client for losses due to the adviser’s wrongdoing; and whether advisers should be required to maintain some form of reserve capital.



[1] Proposed Commission Interpretation Regarding Standard of Conduct for Investment Advisers; Request for Comment on Enhancing Investment Adviser Regulation, Investment Advisers Act Release No. 4889 (Apr. 18, 2018), 83 Fed. Reg. 21203 (May 9, 2018).

[2] In a separate release, the SEC proposed Regulation Best Interest, which would require a broker-dealer and natural person who is an associated person of the broker-dealer, when recommending a securities transaction or investment strategy involving securities to a retail customer, to act in the best interests of the retail customer without placing the financial or other interest of the broker-dealer or natural person associated with the broker-dealer ahead of the interest of the retail customer. Regulation Best Interest, Securities Exchange Act Release No. 83062 (Apr. 18, 2018), 83 Fed. Reg. 21574 (May 9, 2018). The SEC also proposed requiring investment advisers and broker-dealers to provide retail investors with Form CRS, to provide retail investors with a short-form client relationship summary document that describes services provided, fees and costs associated with those services, applicable standard of conduct, specified conflicts of interest, and whether there are any reportable legal or disciplinary events. Form CRS Relationship Summary; Amendments to Form ADV; Required Disclosures in Retail Communications and Restrictions on the Use of Certain Names or Titles, Securities Exchange Act Release No. 83063 (Apr. 18, 2018), 83 Fed. Reg. 21416 (May 9, 2018).

[3] The SEC confirmed that the federal fiduciary duty applies equally to automated or “robo” advisers.

[4] (citations omitted). The SEC stated that since the federal fiduciary standard originates under and is enforceable through the Advisers Act antifraud provisions (Section 206), a waiver of that section would be void under Section 215(a) of that Act.

[5] The proposed interpretation does not extend to impersonal investment advice, which is defined in Advisers Act Rule 203A-3 to mean “investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts.”        

[6] The SEC stated that an investment adviser would be able to rely on information provided by a client, and should not be considered to have given advice that is not in the client’s best interest even where it is later shown that a client had “misled” the adviser about their financial profile.

[7] According to the SEC, this obligation applies to all advice that an adviser provides, “including advice about an investment strategy or engaging a sub-adviser and advice about whether to rollover a retirement account so that the investment adviser manages the account.”

[8] See Commission Guidance Regarding Client Commission Practices Under Section 28(e) of the Securities Exchange Act of 1934, Exchange Act Release No. 54165 (July 18, 2006); Amendments to Form ADV, Investment Advisers Act Release No. 3060 (July 28, 2010) (discussing an adviser’s best execution obligations in the context of directed brokerage arrangements and disclosure of soft dollar practices).

[9] In re PNC Investments, LLC, Investment Advisers Act Release No. 4878 (Apr. 6, 2018); In re Securities America Advisors, Inc., Investment Advisers Act Release No. 4876 (Apr. 6, 2018); In re Geneos Wealth Management, Inc., Investment Advisers Act Release No. 4877 (Apr. 6, 2018); In re SunTrust Investment Services, Inc., Investment Advisers Act Release No. 4769 (Sept. 14, 2017); In re Credit Suisse Securities (USA) LLC, Investment Advisers Act Release No. 4678 (Apr. 4, 2017); In re Sanford Michael Katz, Investment Advisers Act Release No. 4679 (Apr. 4, 2017); In re Everhart Financial Group, Inc., et al., Investment Advisers Act Release No. 4314 (Jan. 14, 2016); In re Pekin Singer Strauss Asset Management Inc., et al., Investment Advisers Act Release No. 4126 (June 23, 215); In re Manarin Investment Counsel, Ltd., et al., Investment Advisers Act Release No. 3686 (Oct. 2, 2013).

[10] The SEC states that this would generally include instances in which an adviser would not be able to make a “reasonable judgment” that a client is able to fully evaluate the investment and give informed consent to any conflicts that it presents. The SEC cites as examples highly complex products or other investments with “extensive conflicts” where it would be difficult to provide sufficiently specific and understandable disclosure to clients.

[11] SEC v. Capital Gains Research Bureau, 375 US 180 at 191–92 (Dec. 9, 1963) (stating that the Advisers Act reflects “a congressional intent to eliminate, or at least expose, all conflicts of interest which might incline an adviser—consciously or unconsciously [sic]—to render advice which was not disinterested”). Following a detailed analysis of the legislative history, the Court did not require that investment advisers avoid conflicts of interest, but rather required that they provide appropriate disclosure of conflicts of interest so that clients can evaluate the conflicts. “An investor seeking the advice of a registered investment adviser must, if the legislative purpose is to be served, be permitted to evaluate such overlapping motivations, through appropriate disclosure, in deciding whether an adviser is serving ‘two masters’ or only one, ‘especially . . . if one of the masters happens to be economic self‑interest.’” Id. at 196 (quoting United States v. Mississippi Valley Generating Co., 364 US 520, 549 (1961)).

[12] See Chairman Jay Clayton, Testimony Before the Financial Services and General Government Subcommittee of the House Committee on Appropriations (Apr. 26, 2018) (stating in public congressional testimony that it would “misstate the law and could mislead investors to suggest [that] investors currently have a legal right to conflict-free advice from an investment adviser”).

 

[13] Staff of the US Securities and Exchange Commission, Study on Investment Advisers and Broker-Dealers (Jan. 2011).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.