As financial markets and investors increasingly rely on instant access to data online, financial professionals are publishing more analyses through websites and social media than ever before.  Yet many financial professionals may be unaware of the fine line the Investment Advisers Act of 1940 (the “Advisers Act”) draws between (i) a bona fide publisher of financial analyses and (ii) an investment adviser required to register with the SEC or qualify for an exemption from registration. Thus, financial professionals publishing analyses online or in print should carefully review the “Publisher’s Exclusion” under the Advisers Act. 

What is the Publisher’s Exclusion?

Under Section 202(a)(11) of the Advisers Act, an “investment adviser” includes any person who, for compensation, engages in advising others about securities or issues reports or analyses as part of a regular business.  However, the Publisher’s Exclusion allows certain publishers of financial analyses to be excluded from this definition, thus eliminating the need to register with the SEC for such activity. 

To qualify, a publication must meet three key requirements:

1. Bona Fide or Genuine: The publication must provide disinterested commentary and analysis, free from promotional materials or content designed to evade registration.  In other words, the publication cannot serve as a vehicle for providing personalized investment advice tailored to any specific subscriber’s needs.
2. General and Impersonal: The advice or analysis offered must not be adapted to the specific investment needs of individual subscribers.  A financial professional managing subscribers’ funds or advising directly on their portfolios should not seek to rely on the Publisher’s Exclusion.
3. General and Regular Circulation: The publication must be regularly distributed and not timed to coincide with specific market events or securities activity.  Deviations from a regular schedule are allowed, but they must not involve buy-sell recommendations or commentary tied to market-sensitive events.

Why Does This Matter?

The Publisher’s Exclusion allows financial professionals to disseminate investment-related information without triggering the need to register with the SEC.  However, financial professionals must remain mindful of the Publisher’s Exclusion requirements. 

A financial professional with a publication claiming to be a bona fide and general financial resource, but subtly offering tailored advice or commentary timed to market events, risks being deemed an unregistered investment adviser under the Advisers Act.  Similarly, misleading or false content may expose the publisher to liability under the anti-fraud provisions of the Advisers Act, even if the publications otherwise meet the criteria of the Publisher’s Exclusion.

Key Takeaways

The Publisher’s Exclusion is a nuanced carve-out under the Advisers Act, not a loophole to avoid registration.  Publishers seeking to rely on this exclusion must ensure that their publications meet the bona fide, general and impersonal, and regular criteria.

Understanding the boundary between general commentary and personalized advice is critical to mitigating risks and maintaining regulatory compliance under the Publisher’s Exclusion, and the nuances of the Publisher’s Exclusion underscore the value of informed legal counsel.