On June 14, 2019, the Massachusetts Securities Division upped the fee disclosure requirement for state-registered advisers (i.e., advisers with less than $100 million in assets under management). Starting January 1, 2020, state advisers will be required to provide a one-page, fee table in addition to the usual narrative fee disclosures in Form ADV Part 2A. Advisers will be required to update and deliver the table consistent with existing updating and delivery requirements for Form ADV. Firms are also required to put a link to the table on their websites.
What does this mean?
Massachusetts registered advisers will need to churn out a one-page fee table containing three sections: one for fees charged by the adviser, another for fees charged by third party advisers, and a final one for additional/costs and fees, such as mutual fund expenses. The first section breaks out AUM fees, hourly fees, subscription fees, fixed fees, commissions paid to the adviser, performance based fees, and a space for “other” fees. The table requires inputting the amount (with tiers if applicable), frequency of charging, and a column to identify the services provided. There are identical columns for the third party fees section, which addresses third-party money manager and robo fees. Finally, to the extent that other fees might apply, e.g., mark-ups, custodian fees, commissions not paid to the adviser, etc., the table requires a binary Y/N and, where applicable, that the adviser identify to which firm the money is paid.
Opportunity or Burden?
While the initial set up for the table and updates will entail additional work, it is likely that Massachusetts-registered investment advisers will have a leg up should the SEC and/or other states ultimately decide to impose their own fee “distillation” requirements. Given recent changes under Regulation BI, and consistent pressure across the industry to simplify disclosures around fees and other items, Massachusetts firms may well be ahead of the curve.
Here is a link to the Rule: