On July 26th, the SEC announced that it is proposing amendments to the rule that allows certain investment advisers that provide investment advisory services through the internet to register with the SEC. In 2002, the SEC granted a narrow exception which allowed internet-based advisers to register with the SEC instead of with the states. Investment advisers typically are prohibited from registering with the SEC unless they reach a certain “assets under management” threshold, advise a registered investment company, or qualify for an exemption under SEC rules or statutes. Under rule 203A-2(e) and pursuant to the Investment Advisers Act of 1940, internet investment advisers are exempt from this prohibition if they meet certain conditions, including those concerning the adviser’s use of an interactive website to advise clients.
Should the proposed rule amendments be adopted, they would:
require an investment adviser relying on the internet adviser registration rule to always have an operational interactive website through which the adviser provides ongoing digital investment advisory services to more than one client
eliminate the de minimis exception from the current rule by proposing both to require that an internet investment adviser provide guidance to all of its clients solely via an operational interactive website and make certain corresponding changes to Form ADV
revise the internet advisers exemption to better align registration requirements with modern technology and help the SEC enhance its oversight of registered investment advisers
modernize rule 203A-2(e) to reflect the advancements and developments in technology and the marketplace since the rule’s adoption in 2002 and to better align current practices in the investment adviser industry with the narrow exemption that was intended to reflect Congress’s allocation of responsibility
introduce related changes to Form ADV
Interested parties may submit feedback during the comment period that will remain open until 60 days after the date of publication in the Federal Register.