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Regulation and Compliance > Federal Regulation > SEC

SEC Seeks Comment on 'Information Providers' Acting as Advisors

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What You Need to Know

  • The SEC wants to know under what facts and circumstances these providers are giving investment advice.

The Securities and Exchange Commission is seeking comment on which “information providers,” such as index providers, model portfolio providers and pricing services might come under the commission’s definition of an investment advisor.

“The role of these information providers in today’s markets raises important questions under the securities laws as to if they are providing investment advice rather than merely information,” SEC Chairman Gary Gensler said Wednesday in a statement. “I am pleased to support this request because it will help inform our consideration of when — and under what facts and circumstances — these providers are giving ‘investment advice.’”

The agency is looking for feedback before Aug. 16.

Gensler stated that some information providers “may not fit neatly into the Commission’s existing regulatory structure for investment advisers,” and that the agency seeks comment on how existing rules should apply to them.

In recent decades, Gensler said, “the use of information providers has grown, changing the asset management industry.”

For instance, “registered funds that track indexes have grown substantially to over $10 trillion of assets under management. These indexes have grown not only in size but also in available types, ranging from broad-based indexes for general use to specialized, narrowly-focused ones designed for particular users. Having evolved in size and scope, these indexes are increasingly influential,” he said.

“Thus, an index provider’s decision to include a particular security in an index often influences users of the index to purchase or sell securities. This raises questions about whether the index provider is providing investment advice,” Gensler said.

Model portfolio providers and pricing services, he continued, “have similarly grown and evolved. Each of these providers’ activities raise questions regarding our oversight of investment advisers and how we best protect the public.”


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