Background Check Requirement for Massachusetts IA Representatives to Take Effect in January 2014

Unlawful activities and prosecuted corruption by investment adviser representatives (“IAs”) in the Commonwealth of Massachusetts will now be harder to hide due to a new regulation requiring background checks for IAs which was passed by the Office of the Massachusetts Secretary of State, William F. Galvin, in late December 2013. Beginning January 1, 2014, all investment adviser representatives who are registering in Massachusetts must undergo a background screening through the Massachusetts Criminal Offender Record Information system, also known as CORI, to ensure investor protection against representatives known for committing financial wrongdoing in the past.

The implementation of this measure has been credited to the transition of many firms from federal to state registration after the passage of the Dodd-Frank Act in 2010. Galvin’s Office expressed Massachusetts’s desire to push towards providing protections to investors by requiring background checks modeled after those implemented by the Financial Industry Regulatory Authority (FINRA) on federal broker-dealers. The requirement will affect all representatives registering in Massachusetts, “regardless of whether they are associated with state or federally registered investment advisers.” This background screening requirement, however, is not applicable to investment adviser representatives who are annually renewing their applications to the state.

A Criminal Offender Record Information Acknowledgment Form must be submitted with the initial registration request, which gives permission for the background check. To access a PDF of the Acknowledgement Form, please click here. After completing the form, applicants must submit the form to the Division by emailing it to CORI@sec.state.ma.us. Notably, the Commonwealth of Massachusetts stated that an application for registration will not be deemed complete until this Acknowledgement form is received by the Division.

For more information, or for assistance on other compliance topics, please contact us at (619) 278-0020, or email us at info@corecls.com.

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