SEC Requests Comment on Information Providers Acting as Investment Advisers | Practical Law

SEC Requests Comment on Information Providers Acting as Investment Advisers | Practical Law

The SEC requested information and public comment on whether and under what circumstances information providers, particularly index providers, model portfolio providers, and pricing services, act as investment advisers under the Advisers Act.

SEC Requests Comment on Information Providers Acting as Investment Advisers

Practical Law Legal Update w-035-9454 (Approx. 3 pages)

SEC Requests Comment on Information Providers Acting as Investment Advisers

by Practical Law Corporate & Securities
Published on 16 Jun 2022 • USA (National/Federal)
The SEC requested information and public comment on whether and under what circumstances information providers, particularly index providers, model portfolio providers, and pricing services, act as investment advisers under the Advisers Act.
Update: On October 7, 2022, the SEC reopened the comment periods for several rulemaking releases due to a technical error that resulted in the SEC not receiving comments submitted through its online form between June 2021 and August 2022. The SEC's below request for comment was one of the affected releases. The reopened comment period will remain open for 14 days after the reopening release is published in the Federal Register. For more information, see Legal Update, SEC Reopens Comment Periods for Several Proposed Rules.
On June 15, 2022, the SEC requested information and public comment on whether and under what circumstances information providers act as an investment adviser under the Advisers Act or as an adviser to an investment company under the Investment Company Act. The request for information and comment focuses on three specific types of information providers:
  • Index providers that compile, create methodologies for, sponsor, administer, or license market indexes to be used as a benchmark or can be tracked.
  • Model portfolio providers, including broker-dealers, asset managers, third-party strategists, asset allocators, and advisers, that create general or customized model portfolios, including specialized models focusing on a particular industry or strategy, such as sustainability or ESG investments.
  • Pricing services that provide prices, valuations, and other data about a particular investment to help with determining an appropriate value of the investment.
Under Section 202(a)(11) of the Advisers Act, an investment adviser is a person who:
  • Is engaged in the business of providing advice to others, including in publications or writings.
  • Provides advice on buying or selling securities.
  • Provides such advice for compensation.
Certain persons are also expressly excluded from the definition of investment adviser. For example, the SEC highlights the publisher's exclusion, stating its belief that index providers and pricing services have historically relied on it.
However, given how technologies and advisory practices have evolved, the SEC is now considering, and seeking public comment on, the extent to which information providers' activities may raise investment adviser status issues. In addition, to the extent that such providers' activities may constitute investment advice, the SEC is also requesting comment on all aspects of the investment adviser regulatory regime with respect to information providers.
For more information on registration and other regulatory obligations of investment advisers, see Practice Notes, Registration of Investment Advisers: Overview and Investment Adviser Regulation: Overview.
For up-to-date information on the status of significant SEC rulemaking activities, see Practice Note, SEC Rulemaking Tracker.