AMBA partners with Schwab and best-in-class carriers to protect RIA firms from dishonest, fraudulent acts and thus help protect its balance sheet.
An Investment Advisor’s Fidelity Bond indemnifies the employer for loss of money or other insured property sustained through dishonest acts of employees or third parties. Covered acts typically include larceny, theft, embezzlement, forgery, misappropriation, or other fraudulent activity committed by employees or third parties.
A typical Fidelity Bond for an Investment Advisor firm consists of multiple Insuring Agreements that include: Fidelity, On Premises, In Transit, Forgery or Alteration Securities, and Counterfeit Currency.
Additional coverage options may be available to include: Computer Systems Fraud, Coverage for Data Processing Organization etc.
Schwab’s Policy on Insurance for Advisor Services (“Policy”)
To comply with this Policy, which is applicable to Registered Investment Advisors, Turnkey Asset Management Providers (TAMPs) and Bank/Trusts, your firm must maintain the following types of coverage:
- Errors & Omissions (E&O) insurance
- Social Engineering coverage
- Theft by Hacker coverage(theft of client/firm assets)
- Theft by Employee coverage (if applicable, consult with AMBA)
Fidelity Bond (Crime) and Cybersecurity (Cyber) insurance policies are not required under this Policy. However, it is recommended to review coverage with AMBA’s insurance specialists to evaluate whether the firm’s policies would provide the additional required coverages, stated above, or if these insurance policies would benefit their firm.
Why is this insurance important to my firm?
Over the past several years, there has been a continual increase in the number of errors and fraudulent incidents, with events continuing to increase rapidly. With fraud and cybercrime on the rise and ongoing trading volatility, it’s imperative to evaluate how well your firm is protected. To proactively manage these risks and protect your clients, consistent with fiduciary and other obligations, insurance coverage is vital to a firm’s risk management strategy. Coverage protects your firm and clients from the unexpected, transfers risk away from the balance sheet or personal assets, and may provide coverage for legal costs, settlements, and the costs of operational errors.
What if my firm does not get the insurance coverage required by Schwab’s Policy?
For prospects, failure to comply with the Policy may prevent you from being able to custody assets with Schwab. Firms that are new to Schwab have 90 days to comply with the Policy.
For existing Schwab clients, failure to comply with the Policy may result in termination of your service agreement with Schwab.
