SEC Adopts Amendments Affecting Internet Investment Advisers
SEC Releases
Introduction
The SEC adopted amendments that affect the way Internet Investment Advisers register, particularly with small Investment Advisers.
Although the different potential rule adoptions in 2024 address many topics, the SEC has made it a priority to adjust regulatory requirements based on the way technology is changing the industry.
Certain Investment Advisers are prohibited from registering with the Commission, and the goal is to modernize the exemptions that are in place to fit current industry practices.
Rule Amendments
- Firms relying on the Internet Adviser exemption under section 203A will:
- Be required to always provide investment advice to clients exclusively through an “operational” website.
- No longer have a de minimis exemption allowing fewer than 15 non-internet clients.
- Be required represent on Schedule D of its Form ADV that is has an operational interactive website.
- Firms relying on this exemption will be required to file the amended Form ADV by March 31st, 2025.
- Advisers no longer eligible under the exemption will need to withdrawal its registration and register with the appropriate states by filing a Form ADV-W by June 29th, 2025.
SEC Chair, Gary Gensler’s Comments
- A 2021 Risk Alert noted that almost half of examined advisers were ineligible despite claiming the exemption.
- Firms can no longer use their website “as a prop” to gain an exemption.
Vigilant’s Conclusion
The amendments become effective 90 days after publication in the Federal Register.
This rule adoption, along with SEC Chair, Gary Gensler’s comments, reflects the on-going trend of adjusting regulatory standards to fit with current technology. We have seen how current technology use is an important topic during some SEC Examinations.
It is vital that Firms continue to encourage a strong culture of compliance amongst their team; taking proactive steps to assess the regulatory risks associated with new technology use can help reduce larger regulatory burdens in the future.
Please reach out to us today to discuss how the new Rule Amendments and Adoptions can affect your business, if applicable.