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Massachusetts: Robos Do Not Meet Fiduciary Duties 

The Massachusetts Securities Division has issued a Policy Statement questioning whether robo-advisers can properly undertake their fiduciary responsibilities.  According to the Division, robo-advisers “may be inherently unable to carry out the fiduciary obligation” because of their failure to conduct due diligence and their “de-personalized structure.”  The Division also asserts that robo-advisers cannot simply disclaim their “central fiduciary obligations” in their client agreements.  The Division expresses concerns that robo-advisers fail to consider outside assets, leave it to the client to update critical information, and do not assess whether a client may have diminished capacity.

OUR TAKE: While the MSD’s position is only binding on robo-advisers seeking Massachusetts state registration, we suspect that both the SEC and FINRA will adopt similar positions as they continue to investigate the growth of robo-advisers.

http://www.sec.state.ma.us/sct/sctpdf/Policy-Statement–Robo-Advisers-and-State-Investment-Adviser-Registration.pdf