support the majority of our priests in this case where the commission primary finding which was that  commission the commission of hope on appeal on appeal the record that they were left way was one of negligence and the problem was that the record let me be clear you said the commission or what did the fidelity agreement was the tiriel and the commission defines namely something that their clients would have wanted to know about because of the potential for conflict of interest not be agreement so in the contract but the arrangement the fact that they were receiving cause of color the arrangement arrangement the fact of receipt of compensation from in i'm client in connection with investment advisory advice and that is what question initially question and your client's acknowledged that was material we had a knowledge that business or yes and they knew about the arrangement they knew about the arrangement and what didn't they understand about the question it's not a misunderstanding of the question though the question is are you receiving any money that your clients might want to know about that might affect your judgment in the advice you're giving to your client correct the questioners and so your point acknowledge that the arrangement was material yes and they disclosed th issue is not whether or not it was disclosed in response to question thirteen which note your point is that commission had to say even though your client knew the arrangement the arrangement no our position is we didn't have to describe it in the manner that the securities and exchange commission now or at least when they filed these charges you know what i'm trying to understand why delany couldn't find it either and told your client that in his own issues with defending its own disclosure they communicated it to us in the testimony at trial was that while we disagreed that it wasn't in there are claims are willing to do whatever it took to put in whatever  discretion based on who your clients are based on what your business is and based on what you think they will understand you use whatever word you think here's what we came up with my question and the kickback why isn't that a conflict as an attorney that would be a sufficient or adequate disclosure somehow works so that your client can make choices so why don't they have why didn't they have to buy why weren't they specific upfront why don't they just lay it out and say fidelity is paying compensation to us because we use their platform but only if we choose certainly have been not my insight why when you know it's real or you know what to do right up front i don't understand why they wouldn't upfront have given a specific reason seems like it was kind of pulling teeth to get them to add a word here and there over of the course of ten years kno perspective it was the opposite i think the record clearly shows that they were willing to do anything possible to get the why does why is this why are they so kripke rightly so cryptic and obscure it's not cryptic it's description of the conflict as  investment is selected over another a potentially a road because they know where in terms of how much do you feel you have to go with making investment decisions on a portfolio basis worse comprise of into additional funds with then you move based on each individual one so you take a step back it was when this arrangement came about back in two thousand and five they disclosed it in the way that the conflict presented itself to then they came in two thousand and four and they didn't do a disclosure till two thousand when  conflict if you look at question thirteen does the apple can a really good person have in a range met where it was seized cash or economic benefit including commission from a non client the receipt of compensation from a non client the receipt of outside compensation is because there's the conflict that is what they are responding to in this question now i understand what the r c c says later on that they were obligated to make the step because these others more deeper disclosures or more detail as to instruction requires a level of detail it's not just check a box yes it says general you describe the arrangement explain the conflict of interest and instructions did not exist until two thousand and one second again it does say describe but remember the wait for me to be is intentionally designed to give the advisor the discretion in fact  their business and their clients and that is what they did with because we didn't use what they say we should have done our complete our field to disclose these details of the identified is a reasonable and in doing so they have ignored a tremendous amount of evidence to the contrary that shows how reasonable through this process for example that from the very beginning we hired a compliance consultant experts in the industry to help us track to and craft these disclosures goodman evidence in the record showed a specific disclosure of the details  the compliance consultant had no independent memory of seeing the agreement what he testified was that he was well trained as a former a c examiner to look for conflicts but he was watching the conflicts come from compensation and he that it was his practice to phone for money to search for but does that mean follow the money does that mean what the client is the client and by assumption is what they're hired by somebody so they say they take the information they're given right and then they analyze and like ok you've told me what the potential issues are and here is your forms and i will look at those things and how the process works it could be that way is that how the process works that that's the process could could work and then have the process work here what evidence in america shows how the to renaissance explain to them what was going on show them our disclosure and they approved it to your clients just to point out a site from a card about hand in cream and discussing the arrangement yes but we don't know how they discuss the arrangement we don't know how they discuss theory lake but that's there's no memory issue there they could tell us how they discussed the arrangement what i could tell it but they didn't there's nothing they didn't put evidence in the record saying we've told the delany every single detail of this not every single detail but the recei d compensation and that is something that would was would have been easy to see for anyone looking at the money because as you know appears on the commission statement could only twelve be one payment there isn't a tremendous amount of money coming into the firm from different sources time yes we'll give you a couple of advisors a fiduciary duty to disclose a potential conflict so that so that the investors can make an informed decision about whether to trust their money with your advisor substantial evidence supports the commission's determination that the petitioners breached that duty  is an affirmative duty to fully and fairly disclose the arrangement and the conflict of interest that it created this is a question about the extent of disclosure a whether it would have sufficiently should we make of that if you look at if you look at the volume the number of clients and the amount of business that this company is involved in seems like these are high net worth individuals they're probably sophisticated investors is that's something we should look at in assessing whether the disclosure was sufficient but the fact of an affirmative duty and the standard that they need to exercise reasonable care doesn't depend on the sophistication no but it was sophisticated investor might be able to look at the two thousand and eleven disclosure and how alarm bells go off but so so is legal here i mean it may be that if you're dealing with a complex conflict of interest and there's a question about whether  sufficient amount of detail was used was used then perhaps among other circumstances whether it was reasonable to disclose the conflict in a certain way might that the level of sophistication of the investors of what they say they may receive does not describe this arrangement at all they said they may be received is selling compensation in connection with facilitating securities transactions through tr have the arrangements and you're actually receiving payments continuously you can just say we may be receiving payment illegitimate but in this case i don't think there may is this part of that's an extra problem the fact that they use december two thousand and eleven they didn't disclose those payments or that arrangement at all and so the commission reasonably concluded that that's just not good enough as a fiduciary that's it that those are obviously inadequate disclosure s and you don't need specific guidance as a fiduciary responsible to your clients to know that you actually have to say something that allows your client to do so discern the relevant conflict and nothing in the disclosures up to you said december  think they knew they had this arrangement they knew they were continuously receiving payments for a whole host of mutual funds and there was no evidence of any like is not steve what it was that was triggering what kinds of funds were triggering the payments and so the investor looking at that disclosure wouldn't be able to know ok so ok it's n mean and so the commission's finding of a lack of exercise a reasonable care is is predicated on the fact that the school disclosures were obviously obviously inadequate for a long period of commission was considering the fact that it was finally able to thousand and fourteen where they describe the specific conflict that they're what it what kinds of fines were triggering the payments which are reasoning in the commission's order and to the extent they reason any reasoning it seems to be that they're on the hook because they willfully filed the forms but what the statute two missions findings that right it's the it's the same conduct underlying both counts which is the attic to see if the disclosure on that form and in one county liabilit triggered because it's given to the investors and in the other county liability is triggered because it's given to the commission and the commission says we find nothing worse than negligence we don't find seattle so how can there possibly be a liability for willfully omitting cereal i think you're right because in this context this court and other courts have said it will for it doesn't look to the state of mind doesn't depend on the state of mind of the perpetrator will that willfully means to intentionally commit the act that constitutes the violation and which is which is failing to worse than an act negligent they didn't make the omission willfully nor did they make it recklessly intentionally and i guess i would just go back to once over and other other cases which make clear that that all that matters it doesn't matter whether you knowingly do it whether you have scienter when you're committing the act that constitutes the violation what matters is that you are aware either violation or a failure misstatement but it said that because the adviser was involved in creating those advertisements knew what they knew what they said that was enough to trigger willfulness under section attaches to the concealment not the filing the form i think to willfully admit something in the securities context is to draft a disclosure that does not contain a material fact that you have to that you have to disclose and i think it so very secretary who typed this up obviously a living in that typing the actual conflict type i mean i think that i would hope it would have an easy no that's not you i mean that's a no because you know because she didn't know she didn't intend to submit she was not responsible search for submitting for drafting the language in those forms she may have been asked to type it out in and submit it but she was not responsible for choosing the language  which petitioners here you know testified about how they chose to say now that they have someone in their office who's responsible for filing these forms with the f c c and some you have a it's my job to file these forms that's my job i am the commission form filing that's my job i'm responsible for them i type them up i proofread him i make sure they have all the requirements of the form that the that the commission requires i check all that make sure all environments are there and i don't know that in fact there's a bad actor over here doing some very bad things so i'm not aware that when i said not getting money that actor be over here  be in this case there petitioners were aware that they had to disclosure aware of that there's a requirement to disclose in a we're aware of the language that they chose in the facts underlying a language that they chose and so there was i guess my answer is that these are two different pre provision is serving two different purposes in the purpose of section two or seven is to ensure that the commission is going accurate information in their reports only those who are actually aware of and doing the act and not you know this was not inadvertent they weren't it wasn't by accident this was these were who knew the underlying facts prepare the disclosure that intentionally chose the language it is closures and that the commission needs those people to provide accurate information so they can force the act and throughout the securities laws in other contexts because it was so so on on your theory it is easier to establish liability under a provision th its terms has a willfulness requirement that then you need is to establish liability under a different provision for which the supreme court has said negligence is enough that's often it gets passed that require the work that will form this barrier to impose sanctions on conduct that is it at least in part negligence or under section two or three efore example you need to get and and what what he's doing in the two zero seven context is failing to disclose a material fact and if you had if you had put these defendants if you had asked these defendants at the time of are you are you omitting a material fact from this disclosure under your own assessment of this record they would have truthfully said no because they were mistakenly they mistakenly and negligently believed that the disclosures were good enough but there was nothing worse than that i think that's the same thing your honor as asking whether they knew that their conduct was wrong and that's what's not required under oath as if they knew they were failing to disclose a material fact they knew they were that they would know that they were not complying with  but that's not all they know that i didn't say anything about complying with the law they would think they wouldn't have to know the first thing about two zero seven they would have to know that they're not disclosing something i mean  mean and i guess i said i see those as functionally equivalent if they knew they were a meeting a material fact that would that's it essentially requiring that they know so congress and the commission have decided it's more important commission get the information the client because we're live on the fly do share as to the client and we're talking about conflicts of interest and there's an affirmative duty in every case to you as an investment adviser to to disclose material facts to you or to your clients so it's not  you know it's there the requirement is still there in both cases as an investment adviser you have to provide the material facts to your clients and to the commission and if you will fully was not responsible for the disclosures it was only tangentially involved they need to be the ones who willfully omitted omitted the fact and i think that means they needed to be involved  involved in providing the disclosure to the commission and not everybody is going to be here it was it issues themselves and the commission was able to show how the record shows how involved they were in that process stealing is cutting off liability from people who aren't rich it's not a great answer which part of i'm just saying if the the only circle of people who can be liable are people who have people who are involved and making the disclosure right if they're not involved in making the disclosure they're not  sense it makes sense of it to have seven contacts because of the importance of getting accurate information to the commission and it makes sense you know two or three context because there are other checks on  you pass that the willfulness threshold then you take into account this is very of the conduct whether it's in the negligence or scienter there are other opportunities to take that into account but if you basically imports something enter standard willfulness that i think that will have a serious impact in other contexts that would be inconsistent with the way the commission with the way courts and certainly the commission for a long period of time have interpreted willful