Massachusetts to Require Background Checks for Advisors

Come January, the new rule will apply ‘irrespective’ of whether a rep is associated with state or federally registered advisors

More On Legal & Compliance

from The Advisor's Professional Library
  • Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients’ financial well-being may be jeopardized.  RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.   
  • Advertising Advisor Services and Credentials Section 206 of the Investment Advisers Act contains the anti-fraud provision of the statute and ensures that RIAs’ advertising and marketing practices are consistent with the fiduciary duty owed to clients and prospective clients.   

Starting in January, the Massachusetts Securities Division will require that any person seeking to be registered as an investment advisor in the state must first consent to a background check via the Massachusetts Criminal Offender Record Information (CORI) system.

The Division announced Thursday that the requirement applies to all investment advisor representatives applying for registration in Massachusetts, “irrespective of whether they are associated with state or federally registered investment advisors.” However, the rule does not apply to those making annual renewal applications.

The securities division sought comments in March on whether to require criminal background checks for advisors. Comments were taken until May 15.

The request for comment, issued by Willam Galvin, secretary of the commonwealth of Massachusetts, said the state’s securities division “believes that it is in the public interest and for the protection of investors to conduct criminal background checks of those individuals seeking IAR registration in order to ensure that the applicant is not subject to a statutory disqualification and has truthfully and accurately disclosed any criminal background required on Form U-4.”

Galvin noted at the time that the division’s Registrations, Inspections, Compliance and Examinations Section was recently granted access to utilize the Massachusetts iCORI system, an electronic criminal history database, in order to conduct these reviews.

---

Check out Are Brokers Greedy Scumbags? by Jon Henschen on ThinkAdvisor.

Reprints Discuss this story
This is where the comments go.