Compliance Solutions for Investment Advisers

Massachusetts Adopts New Regs

From the Massachusetts Securities Division:

The Massachusetts Securities Division (the “Division”) is adopting, as amended from the original proposals, regulations found at 950 CMR 12.200 et. seq. (the “Regulations”). With the exception of 950 CMR 12.205(9)(c)(16), the adopted regulations shall become effective upon publication in the Massachusetts Register. The next publication of the Massachusetts Register is scheduled for August 19, 2011.  950 CMR 12.205(9)(c)(16) shall be enforced beginning December 1, 2011.  Proposed regulations related to discretion and custody requirements, and exemptions/exclusions from registration for certain private funds, remain under study and have not been adopted at this time.

A brief description of the regulations is located below.  More information about the proposed and adopted rules can be found on the Massachusetts Securities Division’s website. A letter approving the regulations and the related text is available here. A copy of the adopting release describing the adopted regulations is available here.

If you have specific questions regarding these regulations, please contact the Division at (617) 727-3548.

950 CMR 12.205(9)(c)(16): Certifications Required With Respect to Certain Expert Consultants

The Securities Division is adding 950 CMR 12.205(9)(c)(16) to the existing list of dishonest and unethical practices in order to address the rising use of expert network firms by investment advisers to facilitate paid consultations between investment advisers and industry experts.  Investment advisers will be required, as of December 1, 2011, to obtain written certification in compliance with the regulations from certain industry experts prior to any consultation.

950 CMR 12.205(9)(c)(17): Prohibition of Certain Performance-Based Fees

The Division is adding 950 CMR 12.205(9)(c)(17) to the existing list of dishonest and unethical practices to prohibit the collection of performance based fees, except those fees collected in compliance with the restrictions and conditions outlined in Rule 205-3 under the Investment Advisers Act of 1940. Rule 205-3 provides an exception to the general prohibition on performance based fees if the client is a “qualified client.”

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