The focus on hedge and assignment clauses in investment advisory agreements reflects the SEC’s willingness to scrutinize documentation presented to advisory clients. In particular, the Order’s focus on hedge clauses shares similarities with enforcement actions brought by the SEC under former Chairman Gary Gensler, which pursued an aggressive regulatory enforcement agenda against investment advisers. Charges and ImplicationsThe SEC charged the Advisers with four separate violations of the Investment Advisers Act of 1940 (the Advisers Act). Hedge Clause - Section 206(2)First, as provided in the Order, the SEC found the Advisers utilized investment advisory agreements that included “hedge clause” language, which is designed to limit an adviser’s liability. The Advisers’ hedge clauses, however, were found to be misleading and in violation of Section 206(2) of the Advisers Act.

Source: Wall Street Journal January 29, 2026 19:57 UTC