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Statement on the Proposal re: the Internet Adviser Exemption

July 26, 2023

Thank you, Chair Gensler, and thanks to the staff for their presentations. Today, the Commission is considering whether to propose amendments to Rule 203A-2 under the Investment Advisers Act of 1940 (“Advisers Act”) and to Form ADV.[1] Rule 203A-2(e), also known as the “internet adviser exemption,” generally permits investment advisers that provide advice over the internet to register with the SEC, subject to certain conditions. These conditions include, among others, that the investment adviser provide advice to its clients exclusively through an interactive website, except it may provide advice to fewer than 15 clients through other means during the preceding 12 months.

It has been 21 years since the rule’s adoption in 2002.[2] Major moments in 2002 included the first Blackberry smartphone, US Airways declaring bankruptcy, and the release of the first Spiderman movie. In 2023, the Blackberry is defunct, US Airways has since acquired American Airlines, and the eighth Spiderman movie was released. In fact, the iPhone did not exist in 2002; the first version launched in 2007. While I will defer to Chair Gensler as to what was the notable rom-com of 2002, I will note that Pierce Brosnan was still playing James Bond.

While the rule’s adoption may not have generated major headlines, the staff should be commended for considering whether the rule achieves the outcomes that the Commission intended so many years ago. At that time, the Commission recognized that investment advisers providing advice through the internet likely had clients across the country and may not have had a local state presence, such that registration at the federal – rather than state – level was appropriate and consistent with Congress’s directive in the National Securities Markets Improvement Act of 1996.[3] Since 2002, however, not only has it become easier to provide advice to clients through a website, but the Dodd-Frank Act[4] provided that federal registration was appropriate if the adviser is required to register in 15 or more states provided that it had at least $25 million in assets under management, rather than 30 states, thus making federal registration easier to attain under this provision.[5]

Today’s proposed amendments would require an adviser to have an operational interactive website or mobile app, to provide advice solely to clients via the website, and to have more than one client. An adviser would also be required to make additional representations on Form ADV that it is eligible to rely on the rule. I look forward to commenters’ views on whether this is the right approach. In particular, the release estimates that 40% of advisers that currently rely on the internet exemption may not be eligible if the rule’s amendments were adopted as proposed, thus bringing the total number of advisers registered under the exemption down to approximately 160 advisers.[6] This substantial drop in the number of advisers that may be eligible to use the internet exemption raises questions as to whether this exemption is needed at all, or whether another test would be more appropriate. In addition, I am concerned that the proposed amendments may be overly critical of investment advisers that provide advice through the internet, and I encourage commenters – including firms and investors that use internet advisers – to provide their feedback on their experiences.

For these reasons, I intend to support taking public comment on the proposed amendments. Thank you to the staff of the Divisions of Investment Management, Economic Risk and Analysis, and Examinations, and the Office of the General Counsel, among others, for their diligent work.

[1] Exemption for Investment Advisers Operating Through the Internet, Investment Advisers Act Release No. 6354 (July 26, 2023), available at (“Proposing Release”).

[2] See Exemption for Certain Investment Advisers Operating Through the Internet, Investment Advisers Act Release No. 2028 (Dec. 12, 2002) [67 FR 19500 (Dec. 18, 2002)], available at

[3] National Securities Markets Improvement Act of 1996, Pub. L. 104-290,110 Stat. 3416 (1996) (codified in various sections of 15 U.S.C.).

[4] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (“Dodd-Frank Act”).

[5] See section 410 of the Dodd-Frank Act, section 203A of and rule 203A-2(d) under the Advisers Act (previously, rule 203A-2(e)).

[6] Proposing Release at p. 48.

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