Last week the SEC promulgated two new rules which are of great impact on large-scale securities investors and the firms that advise them.  The below merely touches certain highlights and, I must emphasize, as with all things posted here, does not constitute legal advice.  The regulations and releases are vast (the adopting release for the regulation redefining securities dealers is 247 pages long, has 805 footnotes and is subject to well-reasoned dissents by the two outvoted Republican SEC Commissioners).  Thus forewarned (and if you a registered RIA or a large investment vehicle please call your attorney), here is the broadest of outlines:

DEALERS: A dealer under federal law is defined as an entity or person in the business of buying and selling securities for its own account through a broker or otherwise. BUT it excludes those for which such activity is NOT part of a “regular business.”   We  used to refer to such excluded entities as “investors” or “customers,” who had certain protections under law.  The new Rule requires certain customers, those which regularly invest and trade in securities for its own account with frequency at large scale, to register as a dealer.  The reason is that, according to the SEC, such a trader fulfills the same function as a traditional dealer, funding in the marketplace by creating liquidity for others in the trading markets.

The result of being a dealer is that you must register with the SEC and FINRA (the self-regulatory dealer organization) and file reports with the SEC and comply with regulations that are largely  irrelevant.  While registered investment companies are exempt (they would otherwise have to register with the SEC twice), the new Rule covers private funds and pension funds.  In ways not yet clear at least to me, coverage also does not exclude investment advisers.

In an interesting aside, the SEC Release makes clear that a crypto automated market maker might have to register, which as Commissioner Peirce points out seems tantamount to registering a software protocol.

RIAs: Starting in about a year, registered investment advisers which advise PRIVATE unregistered fund vehicles must  include, in their SEC filings on Form PF, private information about the strategies that such advisers and funds utilize in their securities transactions.  The purpose is better to understand and thus regulate the trading markets, the same rationale for the above dealer regulatory rule.