Massachusetts Issue Marketing Rules Reminder – Advertising, Marketing & Branding

Important points:

• The Massachusetts Department of Securities has issued updated advertising rule requirements guidance for investment advisors registered in Massachusetts.




• Changes to related recordkeeping regulations affect the policies and procedures of state-registered investment advisors.

On November 4, 2022, the U.S. Securities and Exchange Commission (“SEC”) began enforcing updated advertising requirements for federally registered advisors. These rules, which are detailed here, represent significant changes to the rules and regulations governing the marketing and solicitation of investment advisory services. In December 2022, the Massachusetts Securities Division of the Office of the Secretary of the Commonwealth of the Commonwealth of the Commonwealth will mandate for advisers registered in Massachusetts the Massachusetts Uniform Securities Act, Ms. Gen. Laws c. 110A, and the regulations promulgated thereunder. 950 Mass. Code Regs. 10.00 – 14.413 (the “Regulations”).

The guidance reiterated that advertising in Massachusetts is subject to the requirements of the Marketing Rule and additional restrictions under the Rule. These additional restrictions require advisors to:

• Ensure that advertised content does not misrepresent the qualifications of Advisors, their representatives or employees. the nature of the advisory services provided; or the fees charged for such services.




• Make service pricing available and easily accessible (provided the Advisor maintains a website that is available to the public or Advisor’s clients).When




• Establish and maintain a system to oversee the activities of Investment Advisor representatives and other employees to ensure compliance with laws and regulations.

In addition, Massachusetts advisers must refrain from:

• Providing a client with a report or recommendation made by someone other than an advisor without disclosing that fact.




• We assure our clients that specific results will be achieved as a result of the advice provided.When




• Disclose Client’s identity, business or investments to any third party unless required by law or with Client’s consent.

The guidance also notes that Massachusetts counsel will follow the requirements of Rule 204-2 of the Counsel Act (“Rule 204-2”). Rule 204-2 was amended by the SEC in connection with revisions to the Marketing Rule. The changes to Rule 204-2 address changes introduced by the Marketing Rule and are generally designed to assist the SEC staff’s investigations. as a result:

• Advisors must make and keep records of all advertising they disseminate. If an Advisor serves an oral advertisement, the Advisor may satisfy this requirement by retaining a copy of any written or recorded material used by the Advisor in connection with the Oral Advertisement. If an advertisement contains compensatory oral testimony or endorsement, the Advisor may make and maintain a record of disclosures provided to investors, not a record of the advertisement.




• Advisors are required to maintain accounts, books, internal working papers and other documents necessary to form or substantiate the basis for portfolio performance or rate of return calculations. If an Advisor demonstrates Hypothetical Performance, the Advisor must retain supporting records, including copies of all information provided or provided pursuant to the Hypothetical Performance provisions of the Marketing Rules.




• Advisors must record and maintain who the “Target Audience” is in accordance with the Fictitious Performance and Model Fee provisions of the Marketing Rules.




• Advisors must make and keep records of all written communications received and copies of all written communications sent regarding the performance of their predecessors.




• Advisors will also prepare and maintain communications or other documents related to their testimony, endorsement, or determination that they have reasonable grounds to believe that a third-party rating complies with the New Marketing Rules. I have to.




• Advisors who use third-party surveys or surveys in preparation of advertisements must retain copies of such surveys or surveys to the extent available.

As noted above, the adoption of the Marketing Rules represents a significant change in the rules and regulations governing the marketing and solicitation of investment advisory services, and will also affect advisers at the state level. If you need help or have questions about how marketing rules affect your business, the team at Foley Hoag is ready to help.

The content of this article is intended to provide a general guide on the subject. You should seek professional advice for your particular situation.