840 CMR 17: Standards of Conduct For Fiduciaries And Qualified Investment Managers

Summary

840 CMR 17.00 establishes ethical and conduct standards for both retirement board fiduciaries and qualified investment managers. All board members and retirement system staff must be bonded for at least 10% of the fund or $500,000 (whichever is less, up to the bond maximum). Fiduciaries must subscribe to a code of ethics requiring integrity, professional conduct, competence, and independent professional judgment. They must comply with M.G.L. c. 268A (the conflict of interest law), act in accordance with the system's documents and instruments, and are prohibited from self-dealing, acting adversely to the system, or receiving personal compensation from parties transacting system business. Investment managers face similar conduct standards and additional disclosure requirements.

Full Text

840 CMR 17.00, establishing standards of conduct for fiduciaries and qualified investment managers is promulgated by the Public Employee Retirement Administration Commission pursuant to M.G.L. c. 7, § 50 and M.G.L. c. 32, §§ 21 and 23.

17.01 Bonding of Persons Having Access to Retirement Board Funds

All board members and retirement system staff shall be bonded in an amount sufficient to provide reasonable protection against losses due to fraud and dishonesty and each shall be bonded for no less than 10% of the amount of the fund or $500,000. The Commission may prescribe a bond in excess of $500,000, provided that such bond shall not exceed 10% of the amount of the fund.

17.02 Code of Ethics for Fiduciaries

Fiduciaries shall subscribe and conform to the following code of ethics:

(1) Fiduciaries shall conduct themselves with integrity and act in an ethical manner in their dealings with the public, retirement board, employers, employees, and fellow fiduciaries.
(2) Fiduciaries shall conduct themselves and shall encourage other fiduciaries to perform their functions in a professional and ethical manner that will reflect credit on themselves and their profession.
(3) Fiduciaries shall act with competence and shall strive to maintain and improve their competence and that of others in their profession.
(4) Fiduciaries shall use proper care and exercise independent professional judgment.

17.03 Standards of Conduct for Fiduciaries

Every fiduciary shall know and comply with all applicable provisions of M.G.L. c. 268A governing the conduct of public officials and employees and shall conform to the standards of conduct prescribed by M.G.L. c. 268A, § 23.

(1) Every fiduciary shall:
(a) Comply with the standards set forth in 840 CMR 1.00;
(b) operate in accordance with retirement system procedures, documents and instruments; and
(c) inform each retirement system qualified investment manager of the Code of Ethics and Standards of Conduct applicable to qualified investment managers pursuant to 840 CMR 17.02 and 17.04.
(2) No fiduciary shall:
(a) receive additional compensation for services as a retirement board fiduciary if he or she is employed full-time by an employer whose employees are members of that retirement system except as otherwise provided by law;
(b) deal with retirement system assets for his or her own account or in his or her own interest;
(c) act in any manner affecting a retirement system on behalf of any person or organization whose interests are adverse to the interests of the system, its members or beneficiaries;
(d) receive anything of value for his or her own personal account from any person or organization in connection with a transaction involving retirement system assets.

17.04 Standards of Conduct for Qualified Investment Managers and Consultants

Qualified investment managers and consultants must comply with the fiduciary duty standards applicable to the board under M.G.L. c. 32, § 23 and 840 CMR 1.00, the Code of Ethics in 840 CMR 17.02, and all requirements of applicable federal and state securities laws.

REGULATORY AUTHORITY: 840 CMR 17.00: M.G.L. c. 7, § 50; c. 32, §§ 21 and 23.