SEC Seeks Public Comment on Whether Information Providers Are Acting as Investment Advisers

The SEC recently published a request seeking public comment (Request) on whether index providers, model portfolio providers and pricing services (together, “information providers”) should be regulated as investment advisers under the Investment Advisers Act of 1940 (Advisers Act) due to the nature of their activities. The Request notes the significant growth of information providers in recent years and their impact on the asset management industry, including with respect to investor protection and market risk. The Request seeks comments on a wide variety of topics, including the following:

  • the Request’s descriptions of information providers;
  • the types of potential risks and conflicts of interests different types of information providers present;
  • how information providers analyze whether they meet the Advisers Act’s definition of “investment adviser,” including specific factors considered;
  • how information providers might register as an investment adviser (e.g., SEC vs. state registration);
  • potential exemptions from certain provisions of the Advisers Act; and
  • information that registered advisers and funds currently provide to the SEC regarding their information providers.

The Request also specifically seeks comment on certain aspects of the Investment Company Act of 1940 (1940 Act) regulatory regime with respect to information providers, including the following:

  •  whether the information provider of a bespoke index created for a single fund should be considered an investment adviser to the fund;
  • how information providers analyze whether they meet the 1940 Act definition of “investment adviser” under each element of the definition;
  • the extent to which information providers contract directly with funds and the amount of any information provided to the fund board under these circumstances;
  • the extent to which funds extend their fund compliance programs to information providers;
  • the potential amount of time for a fund to comply with the 1940 Act if an information provider to a fund is deemed an investment adviser (and must comply with various provisions of the 1940 Act).

Comments are due on or before August 16, 2022.

The SEC’s press release can be found here.

The SEC’s Request can be found here.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.