On March 27, 2024, the SEC implemented significant amendments to the rule allowing certain online investment advisers to register with the Commission (known as the “internet adviser exemption”).
This New SEC rule has major implications for firms operating in the digital advice space, and compliance professionals need to be aware of the updated requirements.
A Breakdown of the SEC’s New Rule for Investment Advisers
Here’s a breakdown of the key changes:
- Interactive website requirement
Previously, investment advisers could qualify for the exemption by offering some services online, even if they primarily interacted with clients through other channels. Under the new rule, firms must have a fully operational, interactive website where they deliver digital investment advice on an ongoing basis to more than one client. This means static brochures or one-way communication channels won’t suffice.
- De Minimis exception removed
The SEC eliminated the de minimis exception, which allowed advisers to offer services to a limited number of “non-internet clients.”
- Form ADV updates
Firms will need to update their Form ADV to reflect their eligibility for the internet adviser exemption. This includes a specific representation on the form itself.
- Compliance deadlines
The amendments become effective 90 days after publication in the Federal Register. There’s a grace period for existing advisers:
- Compliance with new requirements
Investment advisers must comply with the new rule, including updating Form ADV, by March 31, 2025. This coincides with the filing deadline for most advisers’ annual Form ADV updates.
- Registration changes
Advisers no longer meeting the exemption’s criteria (or lacking alternative registration grounds) need to register in applicable states and withdraw their SEC registration by June 29, 2025.
What Do These Changes Mean for Your Firm?
The New SEC rule signifies a stricter approach to regulating online investment advisers. Compliance teams should carefully evaluate their current digital advice model and make necessary adjustments to ensure they meet the interactive website requirement. Additionally, a thorough review of Form ADV filings is crucial to ensure accurate representation of the exemption if applicable.
The SEC’s focus on modernizing regulations for digital investment advisers reflects the evolving financial landscape. By ensuring a more robust online advice experience, this New SEC rule aims to enhance investor protection in the digital age. Staying informed and adapting to these changes is essential for compliance professionals in the online investment advisory space.
Form ADV with COMPLY
The new SEC rule brings increased complexity for online investment advisers. But navigating these changes doesn’t have to be a burden. At COMPLY, we understand how daunting it can be to file a Form ADV – but we have you covered!
COMPLY’s Regulatory Filings services guide you through the entire process of filing a Form ADV. We’ll help you avoid errors and ensure all parts of your Form ADV (Part 1, 2A, 2B, and C) are accurate and aligned with all the SEC requirements, saving you valuable time and minimizing the risk of regulatory scrutiny.
Whether you need a comprehensive filing solution or assistance with specific sections related to the internet adviser exemption, COMPLY’s team of experts is here to help.
Ready to conquer regulatory filing with COMPLY? Let’s talk!