Massachusetts

Massachusetts’ highest court hands a win to state-level securities regulation in Robinhood case

Published

1 year ago

August 26, 2023

Massachusetts’ highest court hands a win to state-level securities regulation in Robinhood case

Massachusetts’ highest court ruled that the state does have the authority to enforce its own securities standards for brokerages in a “landmark” decision that has some observers hoping reforms will soon follow.

“I am pleased and gratified that the Court has ruled that our Fiduciary Rule is an appropriate exercise of my authority under the Massachusetts Uniform Securities Act,” Secretary of the Commonwealth William Galvin said following the Friday ruling by the Supreme Judicial Court.

“This landmark decision affirms the fiduciary duty of brokers to their customers and vindicates the role of my Securities Division to principally, but aggressively protect investors and police broker-dealer misconduct,” he continued.

Galvin in 2020 filed a complaint against Robinhood, which offers trading via its website and mobile apps, complaining of the platform’s gamification of trading by advising customers, the SJC summarizes, “without considering whether those recommendations were in each customer’s best interest.”

“We are disappointed in today’s decision and remain committed to providing access to the markets for our Massachusetts customers,” Lucas Moskowitz, Robinhood’s deputy general counsel and head of government affairs, said in a statement. “We are in the process of reviewing the opinion and assessing next steps in this matter.”

Robinhood, Galvin wrote in his complaint, “targeted young individuals with little or no investment experience,” with categories like “100 Most Popular” stocks or “Top Movers” akin to encouraging “frequent, risky, and unsuitable trading” by the inexperienced investors.

When Galvin moved to enforce this action, Robinhood challenged his authority to do so as well as claiming, as a “self-directed” brokerage, no responsibility toward investment advice, to which a lower court judge ruled in favor. Galvin in turn appealed, landing the case at the SJC.

The disagreement comes from traditionally different standards for broker-dealers, which trade stocks at their customer’s direction for a fee, and investment advisors, which manage customers’ portfolios and provide investment advice.

“Over time, the once-clear dichotomy between the services offered by broker-dealers, on the one hand, and investment advisers, on the other, has ‘blurred,’” SJC Justice Dalila Argaez Wendlandt wrote in the ruling.

The federal Securities and Exchange Commission tried to reconcile its regulation of the blurring distinction with its Regulation Best Interest, or Reg BI, establishing a standard of conduct for the businesses when recommending a trade.

The proposals “fall short of providing the reforms needed to protect retail investors when they receive advice and recommendations from broker-dealers,” Galvin wrote in an August 2018 letter to the SEC, which stressed that such businesses “must provide advice under a true fiduciary standard.”

Knut Rostad, the president of the Institute for the Fiduciary Standard, a Virginia-based nonprofit, applauded the SJC’s decision Friday and said he hopes the move will clear the way for other states to do likewise.

“The states in various ways have played second fiddle to the Securities and Exchange commission for regulating securities and advice. There has been a perception that it’s difficult or not possible for states to regulate in a way that is different or more rigorous than the feds,” Rostad told the Herald by phone Friday.

He said Galvin in this move was “enlightened and progressive” and that “There’s no question whatsoever in my mind that there will be other state regulators looking at this opinion (and then) looking at their own state laws to see if they have an opportunity to do a similar sort of thing.”

AP Photo/Patrick Sison, File

The logo for the Robinhood app seen on a smartphone in 2020. (AP Photo/Patrick Sison, File)

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Massachusetts

Local startups recovering from the burst tech funding bubble – The Boston Globe

Published

2 hours ago

January 15, 2025

Press Room

Local startups recovering from the burst tech funding bubble – The Boston Globe

Tech startups based in Massachusetts finished 2024 with a buzz of activity in venture capital fundraising.

In the fourth quarter, 191 startups raised a total of $4.1 billion, 20 percent more than startups raised in the same period a year earlier, according to a report from research firm Pitchbook and the National Venture Capital Association. For the full year, local startups raised $15.7 billion, about the same as in 2023.

The stability ended two years of sharp declines from the peak of startup fundraising in 2021. Slowing e-commerce sales, volatility in tech stock prices, and higher interest rates combined to slam the brakes on startup VC activity over the past three years. The 2024 total is less half the $34.7 billion Massachusetts startups raised in 2021.

But local startup investors have expressed optimism that VC backing will continue to pick up in 2025.

The fourth quarter’s activity was led by battery maker Form Energy’s $455 million deal and biotech obesity drugmaker Kailera Therapeutics’ $400 million deal, both in October, and MIT spinoff Liquid AI’s $250 million deal last month. Two more biotech VC deals in October rounded out the top five. Seaport Therapeutics, working on new antidepressants, raised $226 million and Alpha-9 Oncology, developing new treatments for cancer patients, raised $175 million.

Massachusetts ranked third in the country in VC activity in the quarter. Startups based in California raised $49.9 billion and New York-based companies raised $5.3 billion.

Venture capital firms, however, had an even harder time raising money in 2024 compared to earlier years. Massachusetts firms raised $5.9 billion, down 7 percent from 2023 and the lowest total since 2018. That mirrored the national trend, as VC firms across the country raised $76.1 billion, down 22 percent from 2023 and the lowest since 2019.

Only one Massachusetts-based VC firm raised more than $1 billion in 2024, a more common occurrence in prior years, according to the report: Flagship Pioneering in Cambridge raised $2.6 billion in July for its eighth investment fund plus another $1 billion for smaller funds. The firm, founded by biotech entrepreneur Noubar Afeyan, helps develop scientific research for startups in addition to providing funding.

The next largest deals were Cambridge-based Atlas Ventures’ $450 million biotech-focused fund announced last month and Engine Ventures $400 million fund investing in climate tech startups announced in June.

The decline comes as VC firms have had trouble getting a return on their investments, because so few startups have been able to go public. Just six biotech companies based in Massachusetts and no tech companies went public last year.

Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him @ampressman.

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Massachusetts

Mass. gives noncompliant towns more time to meet MBTA zoning regulations

Published

11 hours ago

January 15, 2025

Press Room

Mass. gives noncompliant towns more time to meet MBTA zoning regulations

The Healey administration filed emergency regulations late Tuesday afternoon to implement the controversial law meant to spur greater housing production, after Massachusetts’ highest court struck down the last pass at drafting those rules.

The Supreme Judicial Court upheld the MBTA Communities Act as a constitutional law last week, but said it was “ineffective” until the governor’s Executive Office of Housing and Livable Communities promulgated new guidelines. The court said EOHLC did not follow state law when creating the regulations the first time around, rendering them “presently unenforceable.”

The emergency regulations filed Tuesday are in effect for 90 days. Over the next three months, EOHLC intends to adopt permanent guidelines following a public comment period, before the expiration of the temporary procedures, a release from the office said.

“The emergency regulations do not substantively change the law’s zoning requirements and do not affect any determinations of compliance that have been already issued by EOHLC. The regulations do provide additional time for MBTA communities that failed to meet prior deadlines to come into compliance with the law,” the press release said.

Massachusetts’ Supreme Judicial Court ruled that the state’s attorney general has the power to enforce the MBTA Communities Law, which requires communities near MBTA services to zone for more multifamily housing, but it also ruled that existing guidelines aren’t enforceable.

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The MBTA Communities Act requires 177 municipalities that host or are adjacent to MBTA service to zone for multifamily housing by right in at least one district.

Cities and towns are classified in one of four categories, and there were different compliance deadlines in the original regulations promulgated by EOHLC: host to rapid transit service (deadline of Dec. 31, 2023), host to commuter rail service (deadline of Dec. 31, 2024), adjacent community (deadline of Dec. 31, 2024) and adjacent small town (deadline of Dec. 31, 2025).

Under the emergency regulations, communities that did not meet prior deadlines must submit a new action plan to the state with a plan to comply with the law by 11:59 p.m. on Feb. 13, 2025. These communities will then have until July 14, 2025, to submit a district compliance application to the state.

Communities designated as adjacent small towns still face the Dec. 31, 2025 deadline to adopt compliant zoning.

The town of Needham voted Tuesday on a special referendum over whether to re-zone the town for 3,000 more units of housing under Massachusetts’ MBTA Communities law.

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Like the old version of the guidelines, the new emergency regulations gives EOHLC the right to determine whether a city or town’s zoning provisions to allow for multi-family housing as of right are consistent with certain affordability requirements, and to determine what is a “reasonable size” for the multi-family zoning district.

The filing of emergency regulations comes six days after the SJC decision — though later than the governor’s office originally projected. Healey originally said her team would move to craft new regulations by the end of last week to plug the gap opened up by the ruling.

“These regulations will allow us to continue moving forward with implementation of the MBTA Communities Law, which will increase housing production and lower costs across the state,” Healey said in a statement Tuesday. “These regulations allow communities more time to come into compliance with the law, and we are committed to working with them to advance zoning plans that fit their unique needs.”

A total of 116 communities out of the 177 subject to the law have already adopted multi-family zoning districts to comply with the MBTA Communities Act, according to EOHLC.

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Massachusetts

Revere city councilor slams Massachusetts officials for being ‘woke’ after migrant shelter bust

Published

19 hours ago

January 14, 2025

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Revere city councilor slams Massachusetts officials for being ‘woke’ after migrant shelter bust

A Revere city councilor says the state’s right-to-shelter law is a “perfect example” of how “woke” ideologies are harmful, as he addressed the arrest of a migrant who allegedly had an AR-15 and 10 pounds of fentanyl at a local hotel.

Originally Published: January 14, 2025 at 6:24 PM EST

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