Some investment advisers provide service only over the internet.  Until now they filed ADVs (disclosure of their practice) with the SEC but did not need to register with the SEC.  Until now they could advise only over the internet except they could talk directly with up to 15 advisees.  Until now their communications and advertising were not well regulated, and they could not register with the SEC (I do not address state law; note that the general SEC regulatory scheme requires advisers with small numbers of advisees to register only with states).

The SEC has just changed the law, effective after an 18-month transition period:

1. Regardless of number of advisees, internet advisers may register federally.
2. No internet adviser can now talk to advisees.
3. Advertising, eg any communication offering services to new or present advisees, is limited.  Performance of portfolios must report net performance, and must include all portfolios and the entire portfolio and must specify the dates covered.
4. Endorsers and ratings are allowed but must be identified as to whether the endorsers are clients and whether either is comped.
5. Any internet adviser that does not register now must maintain digital investment services on an ongoing basis to at least one client.
6. ADV forms must be amended to comply.

Of course, the SEC publicity announcing these new regulations had to mention that an ancillary benefit is to permit the SEC better to regulate performance of advisers of this type.  As a big fan of robust regulation of financial markets, by reason of the historical ease and magnitude of fraud, I nonetheless continue to be amazed at the granularity with which the present SEC is tightening the regulatory framework– if only to see it rolled back if there is a Republican administration elected in November….