Adopted Amendment: 203A-2(e) & Internet Only Investment Advisers

 

Adopted Amendment: 203A-2(e) & Internet Only Investment Advisers

The SEC recently delivered a communication regarding their revisions to the registration of internet-only investment advisers (“IO RIAs”) under rule 203A-2(e) of the Investment Advisers Act of 1940. Here are some important points:

Audience: This rule ONLY applies to SEC Registrants that rely on the Internet Only exemption.

Timing Details for IO RIAs: The amendments will become effective on July 8, 2024. An adviser relying on the internet adviser exemption must comply with the rule by March 31, 2025.

Withdrawal: IO RIAs no longer eligible under the amended exemption must deregister with the SEC and, if applicable, register with state authorities by June 29, 2025.

Key Points

• Operational Interactive Website: IO RIAs using the internet adviser exemption must now offer services on an ongoing basis to more than one client exclusively through a website or mobile application ("operational interactive website”). This means the website must be actively functioning and capable of providing advisory services without interruption, except during minimal, unavoidable outages.
• Elimination of the De Minimis Exception: The updated rule removes the allowance for IO RIAs to have up to 15 non-internet clients within a 12-month period. Going forward, all client advisement must occur via the operational interactive website without exception.
• Form ADV Part 1 Update: IO RIAs must affirm on Schedule D of Form ADV that they maintain an operational interactive website as part of their compliance with the internet adviser exemption.

 For Advisers who rely on this exemption, further updates will be communicated moving forward regarding policy updates and best practices, but please reach out to your Consultant should you have any additional comments or concerns.

 

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