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The Uniform Prudent Investors Act of 1994 (UPIA) sets the basic standards by which all investment professionals acting in a fiduciary capacity must abide. The UPIA updates the requirements and definitions of prudent standards in light of the application of modern portfolio theory and the advancement in the understanding of the behavior of capital markets. The UPIA laid out five fundamental changes in the approach to prudent investing for investment professionals acting in a fiduciary capacity. Those changes are:

• The main consideration of a fiduciary is the management and trade off between risk and reward.

• The standard of prudence for each investment will be viewed in relationship to the overall portfolio rather than as a stand-alone investment.

• The rules regarding diversification have become part or the definition of prudent investing.

• The restrictions from investing in various types of investments have been removed, and the trustee may invest in anything that is appropriate in light of the objectives of the trust and in line with other requirements of prudent investing.

• The rules against delegating the duties of the trustee have been removed and the trustee may now delegate investment functions subject to safeguards.


All investment advisers are required to act in good faith in all of their dealings with customers and are required to uphold just and equitable trade practices. An investment adviser may not employ or engage in:

• Churning.

• Manipulative and deceptive devices.

• Unauthorized trading.

• Fraudulent acts.

• Blanket recommendations.

• Selling dividends.

• Misrepresentations.

• Omitting material facts.

• Making guarantees.

• Recommending speculative securities without knowing whether the customer can afford the risk.

• Short-term trading in mutual funds.

• Switching fund families.

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