On August 8, 2011, the Massachusetts Securities Division adopted a new rule to address the rising use of expert network firms by investment advisers and to prevent the misuse of inside information improperly obtained by expert network firms.

The rule specifically adds to the list of non-exhaustive practices by an investment adviser which are deemed to be dishonest or unethical conduct or practices, retaining certain “investment consulting services” through expert networks without obtaining a written certification that (i) describes all confidentiality restrictions relevant to the potential consultation which the consultant has, or reasonably expects to have; (ii) affirmatively states that the consultant will not provide any “confidential information” (as defined by the rule as any non-public information, which one is bound by a confidentiality agreement or fiduciary, or similar, duty not to disclose) to the investment adviser; (iii) is signed and dated by the consultant, and is accurate as of the date of the initial, and any subsequent, consultation(s). An investment adviser who comes into possession of material confidential information through a consultation is precluded from trading any relevant security until such time as the confidential information is made public. The rule becomes effective on December 1, 2011 and can be accessed here.