SEC Questions Whether Information Providers Are Acting as IAs

The SEC issued a Request for Information ("RFI") and public comment on the activities of index providers, model portfolio providers and pricing services.

The SEC currently defines an investment adviser as "any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or any person who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities."

The SEC is seeking information to determine (i) whether "information providers" should be considered investment advisers under particular circumstances, (ii) if the descriptions of each information provider are accurate and comprehensive, and (iii) whether there are any other types of information providers whose activities, in whole or in part, may raise investment adviser status issues.

Comments on the request must be submitted before the later of 30 days after its publication in the Federal Register or August 16, 2022.

Commissioner Statements

SEC Chair Gary Gensler stated that "[t]he role of these information providers today raises important questions under the securities laws as to when they are providing investment advice rather than merely information." He asserted that clarification of the applicability of existing rules will benefit the market, and that further regulatory action may be appropriate because "[i]n recent decades, the use of information providers has grown, changing the asset management industry[.]"

SEC Commissioner Caroline A. Crenshaw encouraged market participants to comment. She highlighted the significant discretion that index providers, model portfolio providers and pricing services exercise over their respective activities and the extensive impact of these actions on the market.