Regulatory Issues
This page summarizes the most important aspects of the regulatory environment in which PruFid operates. While there are certainly many other statutes which apply to various aspects of all businesses, those listed here are the primary laws applicable to PruFid.
Federal
- The federal Investment Adviser's Act of 1940. This is the principal law which regulates large financial advisers in the USA. Notably, rule 204-3 under the Investment Adviser's Act requires Part 2 of Form ADV (a disclosure document) to be distributed to prospective clients and to be offered to existing clients at least annually thereafter. In addition to meeting that requirement, PruFid's Part 2 of Form ADV is available to anybody who asks at any time—we have nothing to hide.
- Rule 204-5 under the federal Investment Adviser's Act of 1940. This rule requires investment advisers to provide two-page summaries of the nature of their relationship to prospective and current clients. Here is PruFid's Form CRS (a.k.a., Form ADV Part 3).
- Rule 3a-4 under the federal Investment Company Act of 1940. This rule provides guidance for how an investment adviser can avoid being regulated as a mutual fund. Technically, PruFid is generally not subject to this rule (or to the Investment Company Act of 1940) because we generally do not exercise discretionary authority to trade an account. However, PruFid attempts to comply with this rule as though we were subject to it.
- Rule 206(4)-6 under the federal Investment Adviser's Act of 1940. This rule requires investment advisers to adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of clients, to disclose to clients information about those policies and procedures, and to disclose to clients how they may obtain information on how the adviser has voted their proxies. Here is PruFid's Proxy Voting Policy.
- Rule 206(4)-7 under the federal Investment Adviser's Act of 1940. This rule requires investment advisers to to adopt policies and procedures reasonably designed to prevent violations of applicable federal rules and regulations. PruFid complies with this requirement.
- The federal Gramm-Leach-Bliley Act of 1999. The federal (SEC) rules implementing the privacy policy disclosures mandated by section 504(a) of the federal Gramm-Leach-Bliley Act (Pub.L. 106-102) for federal covered Investment Advisers are found in 17 CFR Part 248 (Regulation S-P). It requires that investment advisory companies provide statements of their privacy policies to their clients both when they become clients and on an annual basis. Here is PruFid's Privacy Policy.
- The ERISA Prudent Man Standard of Care. This is the closest there is to a federal statutory prudent investor rule. It applies to fiduciaries of qualified retirement plans. PruFid applies its principals with respect to our PruFid Portfolio Management Service clients.
State
- The Michigan Uniform Securities Act (2002). This is Michigan's version of the federal Investment Adviser's Act of 1940. It applies to Investment Advisers in the State of Michigan with less than $100 million in assets under management. It also governs Investment Adviser Representatives who work in the State of Michigan.
- The federal Gramm-Leach-Bliley Act of 1999. The federal (FTC) rules implementing the privacy policy disclosures mandated by section 504(a) of the federal Gramm-Leach-Bliley Act (Pub.L. 106-102) for state-registered Investment Advisers are found in 16 CFR Part 313. It requires that investment advisory companies provide statements of their privacy policies to their clients both when they become clients and on an annual basis. Here is PruFid's Privacy Policy.
- The Michigan Prudent Investor Rule. This is the Michigan statutory version of the more general Prudent Investor Rule. It provides guidance to investment managers in Michigan regarding the standards for managing an investment portfolio in a legally satisfactory manner. PruFid is fully subject to its terms with respect to our PruFid Portfolio Management Service clients.
- The Michigan Uniform Investment of Institutional Funds Act (2009). This governs investment by nonprofit charitable institutions in the State of Michigan.
This web page contains the current opinions of Eric E. Haas at the time it is written—and such opinions are subject to change without notice. This web page is intended to serve two purposes:
- To educate the public; and
- To provide disclosure of Mr. Haas' opinions to prospective clients. We believe that prospective clients are well-served by being made aware of what they are buying—and what they are buying is advice that is based on these opinions.
We believe the information provided here to be useful and accurate at the time it is written. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.
No investor should invest solely on the basis of information listed here. Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.
This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, PruFid recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser. If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.