Internet-based investment advisory firms rose tenfold over the last several years. With the evolution of information technology, the acceptance of cryptocurrencies, and the shift to a more inclusive investment mindset, this trend is not surprising.
In the early 2000s, investment advisors tapped into the opportunities the internet brought, such as convenience, accessibility, and freedom from geographic restrictions, making it possible for smaller businesses to serve their investors wherever they were located.
There was, however, one obstacle: registration.
Would an adviser have to register in every single state in which they serve clients? In 2002, the U.S. Securities and Exchange Commission (SEC) responded to that issue by establishing the Internet Adviser Exemption Rule.
Per the 2002 Internet Adviser Exemption, RIAs who met the following criteria could qualify for the exemption:
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Firms that provide investment advisory services through a website can be exempt.
- With a de minimus exemption for up to 15 non-internet clients served within 12 months.
- The online-based service must be available 24/7 except for maintenance or other situations outside of the RIA's power.
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The RIA must exclusively offer internet-based advisory services.
- That is, the de minimus caveat was removed, and RIAs that have offline clients will not qualify under the amended rule.
- Services must be delivered via the website, app, or other platform, and advisory services cannot be changed, or delivered by personnel.
