Massachusetts

Fiduciary/Best Interest Development

Advisor Fee Table

  • The Massachusetts Securities Division (“Division”) has adopted a rule requiring investment advisers registered with the Division to create a stand-alone Table of Fees for Services. The Division has provided instructions for creation of the form and a template for development of the Table.
  • Specifically, an investment adviser must create a one-page fee table, which includes all fees and services provided by the adviser. The Division notes that the “Fee Table supplements, but does not replace” an adviser’s disclosure obligations.
  • The fee table must be updated annually in coordination with the timing of required amendments to the adviser’s Form ADV, and must be delivered annually in paper or electronic form to the investment adviser’s current advisory clients.
  • The requirement will be enforced by the Division beginning January 1, 2020.
Sources

Adoption of Amendments to Investment Adviser Disclosure Regulations

Broker-Dealer Fiduciary Standard

  • The Division has issued a revised proposed regulation defining the fiduciary duty owed to customers or clients by broker-dealers, agents, investment advisers, and investment adviser representatives registered in or required to be registered in Massachusetts (referred to as “advisors” in this chart for convenience). The new regulation replaces the one issued in June 2019.
  • The regulation would deem failure to act in accordance with this fiduciary duty to be unethical or dishonest conduct.
  • The proposal would require advisors to adhere to a duty of utmost care and loyalty to the customer or client. This would require the advisor to:
    • “Use the care, skill, prudence, and diligence that a person acting in a like capacity and familiar with such matters would use, taking into consideration all of the relevant facts and circumstances.”
    • Make a reasonable inquiry regarding risks, costs, and conflicts of interest related to the recommendation, as well as a suitability inquiry.
    • Disclose material conflicts of interest and take steps to mitigate them.
    • Make recommendations “without regard to the financial or any other interest of any party other than the customer or client.”
  • The proposal would exclude from the definition of “customer or client” various institutional buyers (in general, accredited investors under the securities laws and 501(c)(3) organizations with a securities portfolio of more than $25 million).
  • The comment period has expired, but there is no proposed date for finalizing the regulation.
Sources

Massachusetts Proposed Fiduciary Standard For Broker-Dealers, Agents, and Investment Advisers