Draft Markup Of Investment Advisory Agreement

Skill: Client-Protective Redline of Investment Advisory Agreement

1. Subject-matter triage

• Treat the form agreement as adviser-drafted and client-protective redrafting as the objective.
• Read the supporting documents first and extract any client-specific requirements, operational constraints, investment-policy terms, or prior negotiation positions that must be translated into markup.
• If the task references multiple supporting documents, enumerate them and reconcile them before drafting; do not assume consistency across materials.
• Build the redline from the client’s perspective: preserve necessary commercial functionality, but elevate protections that affect control, compliance, termination, data access, and liability.

2. Failure modes the skill is correcting

• Redline focuses on economics while missing control, compliance, transition, and risk-allocation provisions that matter most to a fiduciary client.
• Cover memo describes proposed edits without grounding them in legal authority, regulatory requirement, or client policy.
• Draft lumps all changes together instead of separating core protections from negotiable preferences.
• Supporting documents are reviewed but not converted into actual markup changes.
• Markup is visually edited but not robustly encoded, making changes disappear in plain-text or export workflows.
• Recommendations are stated as issues only, without an actionable next step or responsible owner.
• Legal propositions are asserted conclusively without naming the authority that supports them.

3. Legal frameworks / domain conventions that apply

• Review assignment language for consistency with the governing adviser-rule framework and any contract-consent limitations; if transfer-of-control effects are relevant, preserve client consent rights rather than relying on a narrow formalistic definition.
• If the agreement permits use of client brokerage commissions for research or other services, narrow the clause to the applicable safe-harbor standard and require client-appropriate disclosure and periodic reporting under the governing advisory-disclosure rules.
• Require ongoing delivery of the adviser’s current brochure and material updates on the timing required by the applicable advisory-disclosure regime.
• Add transition-assistance obligations so termination does not strand the client: account records, portfolio data, coordination with successor personnel, and non-interference with the handoff.
• Review limitation-of-liability and indemnity provisions to prevent shifting ordinary-negligence risk away from the adviser where client protection is warranted.
• Confirm fee proration through termination and remove post-termination charges, penalties, or non-refundable fees that conflict with the client’s economics.
• Add prompt notice of material regulatory proceedings, examinations, disciplinary events, or other matters that could affect performance.
• Translate any client-policy requirement in the source materials into actual agreement language; do not leave it only in the memo.
• Cite controlling authority for each legal proposition relied on, using the statute, regulation, rule, or recognized authority that supports the position.

4. Analytical scaffolds

• Start by listing the relevant supporting documents and extracting every client-specific requirement that bears on the agreement.
• Identify each proposed change, assign it a clear severity level using a consistent ordinal scale defined once in the cover memo, and explain the practical exposure if the point is not accepted.
• For each substantive redline, pair the markup with a short rationale that ties the change to the governing rule, contract principle, or client policy.
• Separate provisions into: must-have protections, important protections, and preferred negotiating positions.
• Where multiple counterpart provisions interact, read them together and reconcile conflicts rather than redlining a clause in isolation.
• For each issue or proposal, include the operative legal basis, the relevant contract interaction, and the downstream consequence for the client.
• Close the deliverable with concrete recommended actions that name the responsible role and the timing urgency.

5. Vertical / structural / temporal relationships

• Track the agreement vertically: definitions, operative covenants, compensation, disclosures, termination, liability, confidentiality, assignment, transition, and boilerplate should be checked for internal consistency.
• Read cross-references both directions; a change in one section may require conforming edits elsewhere.
• Treat timing language as substantive: notice periods, cure periods, delivery schedules, termination effective dates, and post-termination obligations should be harmonized.
• If the form uses multiple versions, exhibits, schedules, or incorporated policies, ensure the redline reflects them as a single integrated contract package.
• When a provision depends on an external document or client policy, align the contract text to that document’s timing and operational mechanics rather than paraphrasing it abstractly.

6. Output structure conventions

• Produce a single deliverable: the marked-up advisory agreement with a cover memo prepended.
• The cover memo should be organized by negotiating priority, using an explicit ordinal severity scale defined once at the top.
• For each memo entry, state the change, the legal/regulatory/client-policy basis, the client exposure if not accepted, and the recommended negotiation posture.
• The markup must be readable from plain text and must not depend on formatting alone; mark deletions, insertions, and substitutions with explicit textual conventions and attach a brief rationale to each substantive change.
• Ensure every substantive change is captured in the operative draft, not merely described in commentary.
• Use industry-conventional sectioning and headings appropriate for a redlined advisory agreement; do not mirror any hidden checklist structure.
• End with a Recommended Actions block stating the action, the responsible role, and the timing anchor for each recommendation.