SEC Charges Advisory Firm ClearPath with Custody Rule and Liability Disclaimer Violations

The Securities and Exchange Commission today announced settled charges against ClearPath Capital Partners LLC for failing to comply with requirements related to the safekeeping of client assets and for its use of impermissible liability disclaimers in its advisory and private fund agreements. According to the SEC’s order, ClearPath failed to timely distribute annual audited financial statements to investors in certain private funds that it advised. In addition, in its advisory agreements and certain private fund partnership and operating agreements, ClearPath included liability disclaimers, commonly referred to as hedge clauses, that could lead a client to incorrectly believe that the client had waived non-waivable causes of action against the adviser. Certain of the liability disclaimers also contained misleading statements regarding ClearPath’s otherwise unwaivable fiduciary duty.