03.27.24
SEC Tightens Robo Exemption
by: James Langton
Firms that offer robo advice must fully commit to being online-only under reforms being adopted by the U.S. Securities and Exchange Commission (SEC). Historically, smaller advisors had to register with state securities regulators while larger firms could register with the SEC. However, an exemption adopted in 2002 allowed firms that operated primarily online to register with the SEC. In a risk alert, the SEC reported that its reviews of these advisors found weaknesses in their compliance policies and procedures, as well as shortcomings in their portfolio management practices and violations involving marketing and advertising. The SEC is now revising its rules to require that firms relying on the exemption have an operational, interactive website that provides digital investment advisory services on an ongoing basis. They must also exclusively provide advice to clients through the website, meaning they cannot also serve certain clients over the phone.
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