Updates to the Massachusetts Investment Adviser Disclosure Rule

The states continue to be busy with new rule-making! On June 14, 2019 the Massachusetts Securities Division (the ‘Division’) adopted amendments to 950 Massachusetts Code of Regulations 12.205(8). The amendments, applicable to Massachusetts registered advisers, includes two elements, but the key one that we’ll focus on here is the requirement for Massachusetts registered investment advisers to provide current and prospective clients with a fee table for their offered advisory services.

Summary of Disclosure Requirements

An investment adviser must provide each current or prospective client with the following disclosures at least 48 hours before entering into a contract or, if the investment adviser provides disclosures to the client at the time of entering in the contract, the investment adviser must give the client the option to cancel the contract within five business days:

  1. A disclosure statement, which may be a copy of Form ADV, Part 2 or another written document containing the equivalent information. Alternatively, a document that is not Form ADV, Part 2 must be filed with the Division before its first use;
  2. A standalone Table of Fees for services in a Division-approved format that is prepared in accordance with specific instructions;
  3. Any additional information required to be disclosed under the Investment Advisers Act of 1940; and
  4. A notice that any disciplinary history for the investment adviser and employed/associated investment adviser representatives can be obtained from the Division.*

An investment adviser must annually, without charge, deliver (or offer in writing to deliver) the above disclosures to respective advisory clients upon their written request. Any disclosures that an advisory client requests in writing must be sent to the client within seven days of the adviser’s receiving the client’s request.

*This disclosure is to be included within Item 9 of the Form ADV Part 2A.

The Massachusetts Securities Act’s disclosure obligations are considered met if the investment adviser complies with the above four-part requirement.

The adopted amendments to 950 CMR 12.205.(8) will be enforced as of January 1, 2020.

Required Table of Fees

The required Table of Fees must be available and easily accessible on any website the investment adviser maintains for the adviser’s clients and/or for the public.

The Table of Fees must be a one-page, stand-alone document based on information that is already in each investment adviser’s Form ADV Part 2A. The Table of Fees must be prepared on the Securities Division-approved form and in accordance with the guidance and instructions for preparing the required fee disclosure.

Updates and delivery of the Table of Fees must be done consistently with the existing requirements to Form ADV. The purpose of the Table of Fees is to increase transparency of advisory fees and costs, aid comprehension of advisory fees and costs, and enable investors to make more informed decisions when choosing their investment advisers. The Table of Fees achieves this goal by clarifying the information about fees and services from the investment adviser’s brochure into a simple, easily understandable format to enable a side-by-side comparison of investment advisers and promote more informed questions and conversations about services and fees.

The Table of Fees must be annually updated as of the date the investment adviser is required to file any annual Form ADV amendments.

Need more guidance? The Massachusetts Securities Division will be conducting an in-person training session to assist investment advisory firms with their preparation of the document. The training session will be held on October 29, 2019 at the Best Western Hotel in Marlborough, MA, and information is available here. A copy of the presentation will be available to those who cannot attend the in-person training. CSS, through its Ascendant compliance services division, can also help. Check out our services and contact us.

Subscribe to CSS Blog

CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.

Loading form...

Latest Content

Giving Voice to Values: A New Approach to Ethics

The “Giving Voice to Values” program grew out of Professor Mary Gentile’s frustration of what was going on in both the financial industry and in higher education. She was frustrated and angry about the poor way that ethics was being taught in universities and applied in real-world scenarios. What developed out of her frustration is … Continued

Tips for Developing a Tailored Private Fund Compliance Calendar

As regulatory concerns proliferate and become more complex, developing and monitoring your “to-do” list becomes of paramount importance.  John Gentile, the Director of Private Fund Manager Services for Compliance Solutions Strategies and Michael Emanuel, a Partner at Stroock & Stroock & Lavan LLP provided attendees of the recent CSS 2019 Fall Conference some insight into … Continued

Brexit: Implications for Shareholders with Threshold Interests

As yet another deadline approaches for the United Kingdom to either leave the European Union with a withdrawal agreement in place or else exit effective immediately in a “no-deal” scenario, it is worth examining how this would affect asset managers subject to the UK regimes for major shareholdings, short selling, and dealing disclosures. First, the … Continued