Generally, investment advisers 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.

The newly adopted amendments will:

• require an investment adviser relying on the internet adviser registration rule always to 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 to require that an internet investment adviser provide guidance to all of its clients solely via an operational interactive website
• 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

The amendments go into effect 90 days following publication in the Federal Register. An adviser relying on the internet adviser exemption must adhere to the rule, including the requirement to amend Form ADV to include a representation that the adviser is eligible to register with the SEC under the internet adviser exemption. Compliance with the rule is required by March 31, 2025 (90 days after the end of the fiscal year, December 31, 2024), by which time the majority of investment advisers will file their annual updating amendments to Form ADV. An adviser that may no longer rely on the amended exemption and does not otherwise have a basis for registration with the SEC must register in one or more states and withdraw its registration with the SEC by filing a Form ADV-W by June 29, 2025.

Sources:

SEC Adopts Reforms Relating to Investment Advisers Operating Exclusively Through the Internet (sec.gov)

Internet Adviser Registration Reforms Fact Sheet (sec.gov)

Final Rule: Exemption for Certain Investment Advisers Operating Through the Internet (sec.gov)