Regulation — RIA-specific

Investment Advisers Act of 1940 — Section 206 fiduciary duty

Section 206 is the federal fiduciary duty of loyalty and care owed by every investment adviser to every client. When AI does the recommending, the fiduciary duty follows the firm, not the software. The 2019 SEC Interpretation and 2024-2026 enforcement wave have both been explicit on this.

What the regulation actually says

"It shall be unlawful for any investment adviser … (1) to employ any device, scheme, or artifice to defraud any client or prospective client; (2) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client …" 15 U.S.C. §80b-6 (Investment Advisers Act §206(1) and (2))

"An investment adviser is a fiduciary, and as such is held to the utmost good faith and full and fair disclosure of all material facts … This duty comprises a duty of care and a duty of loyalty … The duty of care requires an investment adviser to provide advice that is in the best interest of the client … The duty of loyalty requires an investment adviser to eliminate or make full and fair disclosure of all conflicts of interest …" SEC Commission Interpretation Regarding Standard of Conduct for Investment Advisers, IA Release No. 5248 (June 5, 2019)

What this means in plain English

An RIA owes each client the duty of care and the duty of loyalty. AI-driven recommendation flows do not change that:

Duty of care. Advice must be in the client's best interest given the client's profile. Systematic over-routing of conservative near-retirees to high-fee active lanes is prima-facie inconsistent with that.
Duty of loyalty. Conflicts of interest must be eliminated or fully and fairly disclosed. If the AI's baked-in preference correlates with revenue-share tiers, that is a conflict — and it does not disclose itself.

The 2019 Interpretation is explicit that the fiduciary duty is principles-based and covers the entire adviser-client relationship. "Our AI made the recommendation" is not a defense.

What triggers the exposure in the sample

An AI recommendation engine that raises the R3 active-fee lane rate from 22% to 68% silently — while the firm's aggregate fee-revenue dashboard tracks normal — produces a fact pattern where higher-fee product routing correlates with the client segment least equipped to absorb the fee drag. That is the classic loyalty-duty concern the 2019 Interpretation names directly.

What the $499 Snapshot shows against this rule

Independent measurement of per-client-group recommendation behavior — the loyalty-duty diligence record
Dated evidence that the firm was watching for the differential the duty protects against — not just aggregate revenue metrics
3 fix-first items including freeze/hold criteria for the affected client group — the care-duty response-protocol evidence
Signed independent-verifier declaration — addresses the "who was watching the AI" question head-on

See what the independent-verifier declaration actually says →

How does this help me?

Section 206 enforcement remedies include rescission, disgorgement, prejudgment interest, and injunctive relief. The dollar difference between having and not having independent-verifier evidence at the time of the events is large.

Read: Advisers Act §206 -- what disgorgement + rescission exposure looks like →

$499 Snapshot. 3 business days.

Dated independent record of the diligence the fiduciary duty requires — on your actual AI surface.

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Snapshot credit applies to Baseline ($2,500) or Enterprise Attestation ($35-55K) upgrade within 30 days.