Current through Register 1531, September 27, 2024
In addition to the standards of conduct for fiduciaries and the
standards set forth in
840 CMR 1.00 Qualified
Investment Managers shall comply with 840 CMR 17.04. 840 CMR 17.04 shall also
apply to Consultants retained pursuant to
840 CMR 25.00.
(1) Compliance with Applicable Law,
Regulations, Code of Ethics and Standards of Conduct.
(a) Knowledge of and Compliance with
Applicable Law, etc. Every qualified investment manager and every consultant
shall be familiar with and comply with all applicable laws and rules and
regulations, including rules and regulations of any self-regulatory agency of
the profession, the standards of conduct of
840 CMR
17.03 and 17.04 and the code of ethics of
840 CMR
17.02.
(b) Assisting Legal and Ethical Violations
Prohibited. No qualified investment manager or consultant shall knowingly
participate in, or assist any act in violation of any statute or regulation
governing securities matters or any act in violation of the code of ethics of
840 CMR
17.02 or the standards of conduct of
840 CMR
17.03 and 17.04.
(c) Use of Material Non-Public Information
Prohibited. Every qualified investment manager and every consultant shall
comply with all laws and regulations relating to the use of material non-public
information. No qualified investment manager or consultant shall communicate or
take investment action on the basis of such information until it is publicly
disseminated and any qualified investment manager or consultant who acquires
such information, other than as a result of a special or confidential
relationship with an issuer, shall make reasonable efforts to achieve public
dissemination of such information by the issuer.
(2)
Supervision of
Employees. Every qualified investment manager and every consultant
shall exercise reasonable supervision over employees and agents subject to his
or her control to prevent violation by such persons of applicable statutes,
regulations, the code of ethics of
840 CMR
17.02 and the standards of conduct of
840 CMR
17.03 and 17.04.
(3)
Investment Recommendations
and Actions.
(a) Reasonable
judgment. Every qualified investment manager and every consultant shall
exercise diligence and thoroughness in making investment recommendations and/or
in taking investment actions for a retirement board and shall:
1. have a reasonable and adequate basis for
each investment recommendation and action, supported by appropriate research
and investigation; and
2. maintain
appropriate records to support the reasonableness of each investment
recommendation and action.
(b)
Portfolio Investment
Recommendations and Actions. Every qualified investment manager
and every consultant shall, when making an investment recommendation or taking
an investment action for any portfolio or retirement board, consider its
appropriateness and suitability for that particular portfolio or board. In
doing so, the qualified investment manager and consultant shall take into
account the needs and circumstances of the board, the basic characteristics of
the portfolio and the basic characteristics of the investment involved. Every
qualified investment manager and every consultant shall use reasonable judgment
in determining the factors to be considered and the weight to be given to each
factor and shall distinguish between fact and opinion in presenting investment
recommendations.
(4)
Misrepresentation Prohibited. No qualified investment
manager or consultant shall make any statement, orally or in writing, which
materially misrepresents the services that the qualified investment manager or
consultant is capable of performing for the board, the qualifications of the
qualified investment manager or consultant, the investment performance that the
qualified investment manager has achieved or can be expected to achieve for the
board or the expected performance of any investment. No qualified investment
manager or consultant shall make any unsupported statement concerning these
matters or any statement, orally or in writing, about any investment which
guarantees or conveys any unsupported assurances, explicitly or
implicitly.
(5)
Fair
Dealing With Retirement Boards. Every qualified investment manager
and every consultant shall act in a manner consistent with the qualified
investment manager's and consultant's obligation to deal equitably with a board
when making investment recommendations, making material changes in prior
investment advice, and taking investment action.
(6)
Priority of
Transactions. Every qualified investment manager and consultant
shall conduct himself or herself in such a manner that transactions for the
retirement board have priority over personal transactions, and that personal
transactions do not operate adversely to the board's interest. A qualified
investment manager making a recommendation about the purchase or sale of a
security shall give the board adequate opportunity to act on the recommendation
before acting on the qualified investment manager's own behalf.
(7)
Disclosure of
Conflicts.
(a) Every qualified
investment manager, and every consultant when making an investment
recommendation or taking an investment action, shall disclose to Commission and
the board in writing any conflict of interest the qualified investment manager
or consultant may have and any beneficial ownership of the securities involved
which could reasonably be expected to impair the qualified investment manager's
or consultant's ability to render unbiased and objective advice.
(b) Every qualified investment manager, and
every consultant shall disclose to the Commission and the board in writing all
matters which could reasonably appear to interfere with the qualified
investment manager's or consultant's duty to the board or ability to render
unbiased and objective advice.
(c)
Every qualified investment manager, and every consultant shall also comply with
all requirements as to disclosure of conflicts of interest imposed by law and
by rules and regulations of organizations governing the activities of
investment advisors and shall comply with any prohibition of such activities if
a conflict of interest exists.
(8)
Compensation.
(a) Disclosure of Additional Compensation
Arrangements. Every qualified investment manager, and every consultant shall
inform the Commission and the board of any arrangements, oral or in writing,
for compensation or other benefit received or expected to be received by the
qualified investment manager or consultant or a related person from others in
connection with the qualified investment manager's or consultant's services to
the board.
(b)
Disclosure of Referral Fees. Every qualified
investment manager and every consultant shall disclose to the Commission and
the board any compensation paid or expected to be paid, directly or indirectly,
by the qualified investment manager or consultant or a related person to others
for referring the services of the qualified investment manager or consultant to
the board.
(9)
Relationships with Others.
(a)
Preservation of
Confidentiality. Every qualified investment manager and every
consultant shall preserve the confidentiality of information communicated by
the board concerning matters within the scope of the confidential relationship,
unless the qualified investment manager or consultant receives information
concerning illegal or potentially illegal activities on the part of any
fiduciary or employee of the board. Any knowledge of illegal or potentially
illegal activities on the part of any fiduciary or employee of the board shall
be conveyed to all the members of the board and the Commission.
(b)
Maintenance of Independence
and Objectivity. Every qualified investment manager and every
consultant, in relationships and contacts with an issuer of securities, whether
individually or as a member of a group, shall use particular care and good
judgment to achieve and maintain independence and objectivity.
(10)
Enforcement and
Liability.
(a) Every qualified
investment manager and every consultant shall be deemed to have agreed with the
retirement board:
1. to be liable to the
board for any losses due to any violation of the provisions of M.G.L. c. 32,
§ 23 or of
840 CMR 17.00 including
without limitation, any violation of the code of ethics of
840 CMR
17.02 or the standards of conduct of
840 CMR
17.03 and 17.04;
2. to be subject to removal as a qualified
investment manager or consultant by the Commission in the event that the
Commission determines that the qualified investment manager or consultant has
violated any of the provisions of M.G.L. c. 32, § 23 or of
840 CMR 17.00, including,
without limitation, any provision of the code of ethics of
840 CMR
17.02 or the standards of conduct of
840 CMR
17.03 and 17.04; and
3. that neither the board nor the Commission
shall be liable to the qualified investment manager or consultant for any such
loss, by way of indemnity or otherwise, or for any such removal.
(b) No qualified investment
manager or consultant removed by the Commission pursuant to 840 CMR
17.04(10)(a)2. shall continue to serve or be employed as a qualified investment
manager or as a consultant by any other retirement board except as may
otherwise be authorized by the Commission.
