The SEC brought a settled action against RIAs, Family Wealth Advisers, LLC & Family Wealth Asset Management, LLC, who required clients to sign investment advisory agreements that included liability disclaimer language, commonly referred to as a hedge clause, which contained misleading statements regarding the scope of each adviser’s unwaivable fiduciary duty. Advisory agreements failed to provide, in substance, that no assignment of the advisory agreement may be made by the investment advisers without the consent of the advisory clients. To the contrary, the agreements improperly permitted assignment of the client advisory agreements without client consent. Advisory agreements specifically provided advisers with custody of client assets, yet advisers failed to obtain verification by an independent public accountant of client funds and securities as required under the Custody Rule. The firms were further charged with compliance violations for failing to implement procedures to prevent such violations. The advisers agreed to pay a $85,000 penalty and revised advisory agreements for all clients. RIAs should review all advisory agreements to ensure that they include required non-assignment provisions and do not include any hedge clause or liability disclaimer language. If the Firm is not automatically assumed to have custody, as in the case of a private fund manager, compliance staff should specifically review agreements for any language that may be construed as custody and, if so, ensure compliance with all aspects of the Custody Rule.