Background

On March 27, 2024, the Securities and Exchange Commission adopted amendments to modernize the rule for internet investment advisers relying on the exemption that qualifies them for SEC registration as smaller investment advisers. Investment advisers generally need to meet the assets under management threshold, advise a registered investment company, or qualify for an exemption to be registered with the SEC. Previously, Rule 203A-2(f) under the Advisers Act permitted SEC registration for advisers that provided investment advice to all their clients exclusively through a website. The rule also provided an exemption for internet-based advisers that served fewer than 15 non-internet clients within the previous 12 months. With these amendments, internet investment advisers will have to meet new requirements to register with the SEC.

Requirements for Exemption

The amendments will require an investment adviser relying on the internet adviser exemption to always have 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 its clients exclusively through an operational interactive website and to make certain corresponding changes to Form ADV.

Compliance Date

These amendments will become effective on June 25, 2024. Firm’s currently relying on the internet adviser exemption will have to be in compliance by this date. Internet advisers will need to update their Form ADV to reflect a representation that the adviser is relying on the exemption by the March 31, 2025 annual amendment date.