840 CMR 26.00: CONSULTANTS
840 CMR 26.00 is the standard rule for the retention of a consultant
promulgated by the pursuant to M.G.L. c. 7, § 50 and M.G.L. c. 32, §§ 21
and 23. Except as may otherwise be provided by the Commission, or by
supplementary rules of a particular retirement board approved by the
Commission pursuant to 840 CMR 14.02, or by statute, 840 CMR 26.00 is
the standard rule for the approval of a consultant.
26.01: Retention of a Consultant
(1) Any board which employs a consultant must apply for approval of the
consultant from the Commission by filing an application for approval on
Form 25 with the Commission. Such application shall take place with
respect to consultants employed as of the effective date of 840 CMR 26.00,
prior to the board executing a contract extension, renewal or new contract or
six months after the effective date of 840 CMR 26.00, whichever is earlier.
(2) Any such consultant must be registered as an investment adviser
pursuant to the Investment Advisers Act of 1940 (15 U.S.C. 80b - 1 et seq.).
(3) Any such consultant must be deemed a qualified consultant by the
Commission prior to providing services to the board.
(4) Boards shall use the following process in selecting consultants:
(a) Boards shall establish specifications and criteria for selection
1. whether a full-line consulting firm will be employed or whether a
limited-line firm will be employed;
2. the type of firm to be selected (a firm offering a wide range of
products or services or a firm specializing in the consulting area);
3. the experience of the consulting firm's personnel;
4. an initial determination as to whether the existing consultant will
be retained automatically;
5. the range of fees that are considered tolerable; and
6. he consultant's experience in policy restrictions including South
Africa and Northern Ireland and tobacco.
(b) A written contract shall be executed stating all terms and conditions
of employment including, but not limited to, an itemized list of services
to be provided, term of employment, fees and termination provisions. No
contract shall contain a provision which requires the indemnification of
the consultant by the retirement board. A copy of every contract shall be
retained by the board and be subject to audit by the Commission.
(5) Fee schedules shall not be based on a percentage of assets but shall be
based on a fixed dollar amount based on services provided.
(6) A consultant shall inform the and the board of any arrangements, oral or
in writing, for compensation or other benefit received or expected to be
received by the consultant or a related person from others in connection with
the consultant's services to the board.
(7) A consultant shall disclose to the Commission and the board any
compensation paid or expected to be paid, directly or indirectly, by the
consultant or a related person to others for referring the services of the
consultant to the board.
(8) A consultant shall disclose to the Commission and the board in writing
any conflict of interest the consultant may have which could reasonably be
expected to impair the consultant's ability to render unbiased and objective
(9) All consultants shall submit Form ADV Part II of the Uniform
Application for Investment Adviser Registration to the board and to the
26.02: Determination of Qualifications of Consultant; Review of Application
(1) Consultant. The Commission shall determine, for every application for
approval, whether the board has a consultant registered as an investment
adviser pursuant to the Investment Advisers Act of 1940 (15 U.S.C. 80b - 1
et seq.) as required by 840 CMR 26.01(2).
(2) Review of Application. If the Commission determines that the board
has a consultant as required by 840 CMR 26.01(2), the Commission shall
review the selection process of the consultant, review the information
contained in the application for approval, and review the professional
qualifications of the consultant in accordance with 840 CMR 26.03.
26.03: Rating of Qualifications for Consultants
In rating qualifications for consultants the Commission shall develop and
disseminate objective criteria uniformly to be applied in an equitable fashion.
These criteria shall
include, but not be limited to, the professional qualifications of the
consultant, public and private pension accounts as of the year preceding the
year of application, staffing of consulting organization, consulting
organization, and reporting and client servicing.
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