Is your financial-services contract worth signing?

I work both sides of a financial-services hire: the firm papering a portfolio manager, analyst, or trader, and the individual handed an agreement and a signing deadline. The pay is real money and the covenants are real constraints, so the wrong language costs someone for years. The goal here is plain: a straight read on what the agreement actually does, and the specific terms I would fix before anyone signs.

A fund hire usually runs on one of two structures, and each typically pairs the main agreement with a second document. Two of these are employment instruments, and two are independent-contractor instruments. Knowing which structure you are in decides almost everything else on this page.

The employment agreement for a supervised person is where the money lives. Base salary is the least interesting part. What matters is how the bonus is calculated, what share of it is deferred, how that deferral vests, and what happens to unvested amounts when you leave or are let go. Tap any tile for what I watch for.

See the related agreement generators, then bring the draft to me for the fund-specific terms.

There is real temptation to paper a new hire as an independent contractor: no benefits, no payroll tax, a cleaner exit. In regulated finance, that temptation runs straight into how supervision actually works. A supervised person sits inside the firm's compliance structure, follows its policies, and is overseen by its supervisors, which is the opposite of contractor independence. Putting a contractor label on that relationship does not change what it is, and the misclassification falls back on the firm.

Where an ICA is the right tool, I draft it to read like a real contractor relationship: defined scope, fee not framed as a salary, no employee-benefit entitlements, and control terms that match genuine independence. For a sub-adviser or consultant, I also separate the regulatory responsibilities and the indemnification between the entities so neither side inherits the other's exposure.

Independent contractor agreement generator

For a PM, this is the term I would not sign without. Regulatory inquiries and investor litigation are slow and expensive, and the difference between being made whole and being financially exposed is written into two related but distinct concepts.

Indemnification versus advancement

Indemnification means the firm covers your losses for claims arising out of acting within the scope of your duties. Advancement means the firm pays your defense costs as they are incurred, before any final resolution, rather than reimbursing you years later if you prevail. Advancement is the one PMs most often miss and most need, because the cost is front-loaded and the timeline is long.

The carve-outs you should expect

No firm will indemnify fraud, willful misconduct, or bad faith, and you should not expect it to. What you should negotiate is the precision of those carve-outs, so a routine good-faith judgment call cannot be recharacterized later as bad faith to defeat coverage. The carve-outs should be narrow and tied to a final, non-appealable finding, not to a mere allegation.

Who is the indemnitor: the fund or the management company

This matters because the two entities have different assets and different creditors. An indemnity from a thinly capitalized management company can be worth less than one backed by the fund or by insurance. I look at which entity is on the hook, whether the obligation is backstopped, and how it lines up with the firm's directors-and-officers and errors-and-omissions coverage, so the indemnity is not just words but is actually funded.

Indemnification agreement generator

The regulatory overlay sits alongside the contract and does not displace it. That is exactly why the agreement should answer the allocation questions expressly rather than leave them to silence. The cleaner the contract is about who carries each regulatory duty and who bears the cost when something goes wrong, the fewer surprises at the exit or during an inquiry.

Points the agreement should allocate

• Registration status. Who holds and maintains the relevant registrations, and what happens to them on departure.
• Form U4 and Form U5. Who is responsible for accurate and timely filing, how disclosures are handled, and how a departing person's U5 language is addressed, since it follows them to the next firm.
• Supervision duties. Who supervises whom, and how that supervision structure is reflected in the employment relationship.
• Books-and-records. Who keeps required records, who has access on departure, and how confidential firm data is returned.
• Who bears fines. Whether the individual, the firm, or both bear the cost of regulatory fines or sanctions, and how that interacts with the indemnification terms above.

As general practice guidance: Form U4 and U5 obligations and the general anti-fraud framework that applies to advisers exist as part of the backdrop, alongside the contract, and the agreement should name responsibilities and cost-bearers rather than assume them. Before relying on any specific rule citation for your matter, confirm the operative text from the current source.

Restrictive covenants in fund agreements are governed by ordinary state restrictive-covenant law, not by a special finance rule. There is no federal ban on non-competes: the FTC's 2024 Non-Compete Clause Rule was set aside on a nationwide basis on August 20, 2024 in Ryan, LLC v. FTC, where the court held the FTC lacked statutory authority and that the rule was arbitrary and capricious under the APA, and in September 2025 the FTC formally moved to accede to vacatur of the rule, so enforcement reverts to case-by-case state action (FTC press release, September 5, 2025). State law controls, so the governing-law clause matters as much as the covenant itself.

The covenants that matter most in a fund

• Investor versus client non-solicitation. A non-solicit aimed at the fund's investors and LPs is different from one aimed at advisory clients. Define the protected group precisely, because an overbroad sweep is both unfair and harder to enforce.
• Track-record portability. Whether you can use and how you must present your prior performance is usually a contract and prior-firm-policy question. Negotiate ownership and attribution of the record at the front end, not at the exit.
• Garden leave. A paid notice period that keeps you on payroll but off the desk is a common structuring alternative to an outright non-compete, and it is analyzed differently. Funds often prefer it because it protects information without an unenforceable ban.
• Confidentiality and non-acceptance. Protection of confidential information, models, and investor lists is typically pursued through confidentiality and non-solicitation or non-acceptance terms rather than a broad non-compete.

Illinois Freedom to Work Act leaf: thresholds, consideration, and enforcement

Compensation in a fund is a structure, not a number. The agreement should make the moving parts explicit so neither side is surprised at payout time or at the exit.

Performance-fee and P&L allocation

How your share of performance fees or desk P&L is calculated, what costs are netted against it, and any high-water-mark or hurdle mechanics should be spelled out. Vague allocation language is the single most common source of comp disputes I see.

Clawbacks

Clawbacks let the firm recover compensation already paid in defined circumstances. As the individual, you want the triggers narrow and tied to genuine cause, like a restatement of P&L or misconduct, not a catch-all that lets the firm reach back into a paid bonus after a bad year. Limit the look-back period and the recoverable amount.

Good-leaver versus bad-leaver

These definitions decide what happens to unvested deferred comp when you leave. A good-leaver, typically someone who resigns properly, is terminated without cause, retires, or leaves for health reasons, usually keeps more. A bad-leaver, typically someone terminated for cause or who breaches a covenant, usually forfeits. The fight is over which events land in which bucket, so I make those definitions precise and push for pro-rata treatment of unvested amounts where the departure is not the employee's fault.

If you received one of my demand letters and you are reading this to judge whether I actually follow through, here is the straight answer. I do not churn out letters and disappear. The demand letter is the opening step, not the whole plan.

The pre-litigation path

The attorney demand letter and, if the back-and-forth continues, the $1,500 Pre-Litigation Negotiation Phase are the pre-litigation steps. That phase covers additional counter-letters, written settlement negotiation through settlement or impasse, and review of one settlement agreement or release. Most matters resolve here, but resolution is never guaranteed.

When the letter is ignored or talks fail

When a demand is ignored or no settlement is reached, I escalate. I file complaints, I initiate arbitration, and I represent clients in California when the matter calls for it. That is a genuine capability and a genuine willingness, not a bluff. It is also not an automatic promise to sue in every case; whether litigation makes sense depends on the amount, the record, and the other side's exposure.

So the recipient's calculation should account for the real next step. If the demand is ignored, the realistic path is a complaint or an arbitration demand from a licensed California attorney, not another letter.

Should a portfolio manager or analyst be an employee or an independent contractor?

For a supervised person who trades the firm's capital, sits inside the firm's compliance and supervision structure, and follows the firm's policies, the employment model usually fits the reality, and a contractor label can become a misclassification problem. An ICA can work for genuinely independent roles, like an outside consultant, a sub-adviser under its own registration, or a discrete project. The label has to match how the work actually happens. This is general practice guidance and depends on your specific facts.

What indemnification and advancement language should a PM demand?

Indemnification for claims arising from acting within the scope of your duties, and separately advancement of defense costs as incurred, not just reimbursement after the matter ends. Get clarity on which entity is the indemnitor, the fund or the management company, and how that interacts with D&O and E&O coverage. Expect carve-outs for fraud, willful misconduct, and bad faith, and push to make them narrow and tied to a final finding. Confirm the current document language before relying on it.

Are non-competes enforceable against finance employees?

It depends on the governing state law. There is no federal ban: the FTC's 2024 rule was set aside nationwide on August 20, 2024 in Ryan, LLC v. FTC, and in September 2025 the FTC moved to accede to vacatur, so enforcement reverts to case-by-case state law. In Illinois, the Freedom to Work Act voids a non-compete unless earnings exceed $75,000 (rising to $80,000 on January 1, 2027), among other conditions (820 ILCS 90/10). Many funds use garden leave and non-solicitation instead. There is no special financial-services carve-out. Confirm the governing state and the current text.

Who bears regulatory fines and registration costs under the contract?

That is an allocation question the contract should answer expressly. The agreement can address registration status, Form U4 and U5 filing and accuracy, supervision duties, books-and-records responsibilities, and who bears the cost of fines or sanctions. The regulatory overlay sits alongside the contract and does not displace it, so the cleaner approach names the responsibilities and the cost-bearer. I describe the regulatory backdrop in general terms here rather than citing specific SEC or FINRA rule numbers; confirm any specific rule before relying on it.

Can my old track record follow me to a new fund?

Track-record portability is one of the most contested points in a fund departure, and it is usually governed by the contract and the prior firm's policies rather than a single bright-line rule. Whether you can use your prior performance, and how you must present and attribute it, turns on what the agreement says about ownership of the record, confidentiality of fund data, and non-solicitation of investors. Negotiate this at the front end, in the agreement, not at the exit. This is general practice guidance and depends on your documents.

What happens if the other side ignores a demand letter?

The demand letter and the $1,500 Pre-Litigation Negotiation Phase are the pre-litigation steps. If a demand is ignored or no settlement is reached, I do not stop at the letter. I file complaints, initiate arbitration, and represent clients in California when the matter calls for it. Filing, initiating arbitration, and appearing as counsel of record are a separate, separately-quoted engagement, and that representation is California only. For matters governed by another state's law, I draft and run the pre-litigation strategy and coordinate with local counsel.