Here are the key points extracted through InferIQ:

1. The proposal aims to amend rule 203A-2(e) (“Internet Adviser Exemption”) under the Advisers Act.

2. The Internet Adviser Exemption provides an exemption from registration with the Commission for certain advisers providing advisory services primarily through the Internet.

3. The proposed amendments are intended to modernize the conditions of the Internet Adviser Exemption to account for technological advancements and changes in the investment advisory industry since its adoption over twenty years ago.

4. The National Securities Markets Improvement Act of 1996 (NSMIA) amended the Advisers Act to divide the responsibility for regulating investment advisers between the Commission and state securities authorities.

5. Congress allocated to state securities authorities the primary responsibility for regulating smaller advisory firms and to the Commission for regulating larger advisers.

6. The Dodd-Frank Wall Street Reform and Consumer Protection Act amended certain provisions of the Advisers Act, including section 203A, to delegate the oversight of certain mid-sized advisers to the states.

7. The Commission adopted the Internet Adviser Exemption in 2002 to allow certain advisers providing investment advice primarily through the internet to register with the Commission and avoid multiple state regulations.

8. As of December 31, 2022, approximately 256 advisers were relying exclusively on the Internet Adviser Exemption, with an increasing trend in usage after 2015.

9. The proposal suggests amending the Internet Adviser Exemption to require internet investment advisers to maintain an operational interactive website at all times and eliminate the de minimis exception for non-internet clients.

10. The proposed amendments are designed to adapt the rule to the evolution of the asset management industry, enhance investor protection, and allocate Commission resources more efficiently to advisers with a national presence.

11. Proposed Amendments: The SEC is proposing amendments to the Internet Adviser Exemption to modernize its conditions, reflecting technological advancements and changes in the investment advisory industry.

12. Operational Interactive Website: One of the proposed amendments requires internet advisors relying on the exemption to maintain an “operational interactive website” at all times.

13. Exclusivity Requirement: The Internet Adviser Exemption is intended for advisors who exclusively provide investment advice through their interactive website.

14. Representation on Form ADV: If the proposed amendments are adopted, internet advisors must represent on Schedule D of their Form ADV that they have an operational interactive website.

15. Compliance Deficiencies: The SEC’s examination staff has observed compliance deficiencies among advisors relying on the Internet Adviser Exemption.

16. Increasing Usage of the Exemption: The number of advisors relying on the Internet Adviser Exemption has been growing, particularly since 2015.

17. Client Interaction: The proposed definition of an “operational interactive website” includes the use of mobile applications to provide investment advice to clients.

18. Investor Protection: The proposed amendments are designed to enhance investor protection by more efficiently allocating the SEC’s oversight and examination resources to advisors with national presence.

19. Potential Registration Impact: If the proposed amendments are adopted, advisors who currently rely on the Internet Adviser Exemption might need to review their business models and assess whether they still meet the amended conditions for the exemption.

20. Review and Comment: Internet advisors should monitor the rule proposal and consider submitting comments to the SEC to provide feedback or address any concerns related to the proposed amendments.

21. Digital Investment Advisory Services: The proposed definition of “digital investment advisory service” refers to investment advice generated by the operational interactive website’s software-based models, algorithms, or applications based on personal information provided by each client.

22. Requirement for Internet Investment Advisers: The proposed amendments require internet investment advisers to provide advice through an operational interactive website at all times when they rely on the Internet Adviser Exemption.

23. Hardship Clause: The proposed definition includes a hardship clause that allows an internet investment adviser to satisfy the rule despite temporary technological outages of the operational interactive website of a de minimis duration.

24. Technology and Mobile Applications: The proposed definition of “operational interactive website” includes mobile applications as well.

25. Definition of “Digital Investment Advisory Services”: The proposed definition includes investment advice generated by the operational interactive website’s software-based models, algorithms, or applications based on personal information supplied by each client.

26. Elimination of De Minimis Non-Internet Client Exception: The data proposes removing the de minimis exception that allows internet investment advisers to provide investment advice to fewer than 15 non-internet clients during the preceding 12 months.

27. Rationale for Eliminating De Minimis Exception: The rationale for eliminating the de minimis exception is based on the belief that internet investment advisers can now better control in which states they may be required to register.

28. Purpose of Amendments: The document discusses proposed amendments to Form ADV Part 1A, Schedule D, related to internet investment advisers.

29. Estimated Burden: The document estimates that investment advisers subject to the amended rule would incur a total annual hour burden of approximately 1,064 hours, with a monetized cost of $452,200.