On July 26, 2023, the U.S. Securities and Exchange Commission (SEC) announced proposed changes under the Investment Advisers Act of 1940, planned to limit the types of smaller investment advisers that can register with the SEC using the Internet adviser exemption as reported by JDSupra.
The Internet adviser exemption currently allows a registered investment adviser with less than $25 million in assets under management (AUM) that would generally be too small to register with the SEC, to do so as long as it exclusively provides investment advice to its clients via an interactive website and takes part in appropriate engagement activities.
The proposed amendments are expected to impact investment advisers utilizing the Internet adviser exemption, introducing more rigid rules and regulations to narrow the scope of entities eligible for registration under this exemption. Therefore, it will be crucial for legal professionals working with or in such advisory firms, to understand these proposed changes and their implications.
The SEC’s proposed changes to the Internet adviser exemption are not yet in effect and are currently open for public comment. Until final rules are published, investment advisers currently registering under the Internet adviser exemption should continue to comply with the existing rules.
Due to the potential effects these modifications might have on the financial and legal landscape, ongoing developments should be closely observed.