SEC Adopts Reforms Relating to Investment Advisers Operating Exclusively Through the Internet

The Securities and Exchange Commission today adopted amendments to the rule permitting certain internet investment advisers to register with the Commission (the “internet adviser exemption”). The amendments will require an investment adviser relying on the internet adviser exemption to have at all times an operational interactive website through which the adviser provides digital investment advisory services on an ongoing basis to more than one client. The amendments will also eliminate the current rule’s de minimis exception by requiring an internet investment adviser to provide advice to all of its clients exclusively through an operational interactive website and to make certain corresponding changes to Form ADV.

“These amendments modernize a 22-year-old rule to better protect investors in a digital age,” said SEC Chair Gary Gensler. “These changes better reflect what it means in 2024 truly to provide an exclusively internet-based service. This will better align registration requirements with modern technology and help the Commission in the efficient and effective oversight of registered investment advisers.”

The amendments will become effective 90 days after publication in the Federal Register. An adviser relying on the internet adviser exemption must comply with the rule, including the requirement to amend their Form ADV to include a representation that the adviser is eligible to register with the Commission under the internet adviser exemption, by March 31, 2025. Most investment advisers will have filed their annual updating amendments to Form ADV by this date i.e., 90 days after the Dec. 31, 2024, fiscal year end). An adviser that is no longer eligible to rely on the amended exemption and does not otherwise have a basis for registration with the Commission must register in one or more states and withdraw its registration with the Commission by filing a Form ADV-W by June 29, 2025.