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New SEC Rule Narrows Internet Adviser Exemption

Learn about changes in the SEC’s final rule modernizing the internet investment advisers exemption.
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On March 27, 2024, the SEC issued a final rule modernizing the internet investment advisers exemption from the prohibition on SEC registration for smaller firms. Highlights include:

  • Requiring an investment adviser relying on the exemption to at all times have an operational interactive website where the adviser provides investment advisory services on an ongoing basis to more than one client
  • Eliminating the current rule’s de minimis exception for 15 or fewer non-internet clients; an internet investment adviser must provide advice to all clients exclusively through an operational interactive website

SEC registration dates


In 1996, supervision responsibility for investment advisers was divided between state regulators and the SEC based on an asset under management (AUM) threshold or if the firm is advising an SEC-registered investment company (RIC). Congress also delegated the SEC authority to establish guidelines to grant SEC registration for additional advisers for relief from multistate registration and oversight. In 2002, the SEC adopted Rule 203A-2(e) under the Investment Advisers Act of 1940, known as the Internet Adviser Exemption, to allow SEC registration if advisory services are primarily through an “interactive website” and the firm has fewer than 15 non-internet clients. Advisers’ use of technology to reach clients has exploded in the last 20 years and now includes email, website, mobile applications, portals, text, and chatbots. These tech advancements have increased the use of the Internet Adviser Exemption. Unfortunately, there also has been a parallel rise in the number of compliance deficiencies and exemption withdrawals.

As of June 2023, there were 271 advisers relying on the Internet Adviser Exemption, and from 2013 to June 2023, there were 445 exemption withdrawals.

Operational Interactive Website

The final rule uses the term “operational interactive website,” defined in the table below. When relying on the exemption, an adviser must—at all times—have an operational interactive website through which it provides investment advice to more than one client. An internet investment adviser generally is providing investment advice on an ongoing basis through its website to a client if the advice is within the scope of the adviser-client relationship.

Ongoing Basis Examples

An internet investment adviser and a client may come to an express agreement where the adviser-client relationship is of limited duration, such as for the provision of a one-time financial plan for a one-time fee. At the end of the arrangement’s agreed duration, the investment adviser generally would not be providing advice to the former client on an ongoing basis. 

An adviser providing comprehensive discretionary and continual advice to a retail client, e.g., monitoring and periodically adjusting a portfolio of equity and fixed-income investments with limited allocation restrictions, generally would be providing advice to a client on an ongoing basis.

An adviser intending to rely on the Internet Adviser Exemption may rely on current Rule 203A-2(c) (120-day rule) as an initial basis for SEC registration. The 120-day rule allows an adviser that is not registered with the SEC but has a reasonable expectation that it will be eligible for registration within 120 days to register in anticipation of its eligibility. Advisers can use the 120-day rule to develop, test, and launch an operational interactive website and obtain initial clients by the time the 120-day temporary registration expires.

Interactive Website
Operational Interactive Website
A website in which computer software-based models or applications provide investment advice to clients based on personal information each client supplies through the website.
 A website, mobile application, or similar digital platform through which the investment adviser provides digital investment advisory services on an ongoing basis to more than one client (except during temporary technological outages of a de minimis duration).

Digital Investment Advisory Service

Investment advice to clients that is generated by the operational interactive website’s software-based models, algorithms, or applications based on personal information each client supplies through the operational interactive website.

De Minimis Exception

Under the final rule, an internet adviser must provide advice to all its clients exclusively through an operational interactive website. The de minimis exception of 15 non-internet clients is eliminated. If an adviser has non-internet clients, those advisers may register with the state or rely on another basis for SEC registration.

The multistate exemption is still available. It allows advisers that would otherwise have to register with 15 or more states to register with the SEC instead.

Form ADV

To reduce the number of erroneous registrations and subsequent withdrawals, an investment adviser relying on the exemption as a basis for SEC registration must indicate on Schedule D of its Form ADV that it has an operational interactive website.

Compliance Date

These changes are effective 90 days after Federal Register publication. An adviser relying on the Internet Adviser Exemption must comply with the rule, including the new Form ADV representation, by March 31, 2025. An adviser that is no longer eligible for the exemption and does not have a basis for SEC registration must register in one or more states and withdraw its SEC registration by filing a Form ADV-W77 by June 29, 2025.


The asset management team at FORVIS has more than 50 years of experience providing accounting, tax, and consulting services to various investment holdings, including conventional debt and equity investments, loans, businesses, alternative investments, and other unique assets. As of June 2023, Convergence Optimal Performance ranked FORVIS as a top 20 accounting and audit firm for RIAs. FORVIS also was ranked in the top 20 by AUM. We have experience providing services to funds ranging from emerging managers to $100-plus billion in AUM. Our knowledge allows us to provide tailored services to help meet your unique needs. We provide services to private, public, and Cayman funds. If you have any questions or need assistance, please reach out to a professional at FORVIS.

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