Compliance July 28, 2023

SEC Proposes Restricting Internet Adviser Exemption

The proposal would require online financial advisers registered with the SEC to conduct business solely through their respective websites, as opposed to offering a mix of in-person and digital.

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The Securities and Exchange Commission proposed on Wednesday an update to registration requirements for financial advisers who provide advice primarily through the internet.

In 2002, the SEC permitted some advisers with less than $25 million in assets under management to register with the SEC; normally, they would instead file with a state securities authority. The exemption was given to advisers who conduct their business primarily over the internet, as opposed to in person, for which the regulator did not alter the filing threshold.

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Wednesday’s proposal would require advisers using the exemption to provide all advice over the internet, according to the update, which requires that “An internet investment adviser provides advice to all of its clients exclusively through an operational interactive website.” The proposed amendment also requires advisers to maintain an interactive website and to provide services to more than one client using that site.

The “de minimis” exemption, which allows advisers to continue to be considered internet advisers if a small number of their clients are advised off the internet, would be removed by the proposal.

Matt Rogers, an attorney with K&L Gates LLP, says the removal of the de minimis provision is the “big takeaway” for advisers relying on the internet exemption.

Such advisers will have to provide advice solely through the internet under the proposal and can no longer classify as internet advisers if they advise clients in person.

The SEC will accept public comments on the proposal via its website for 60 days after the proposed amendment is published in the Federal Register.

 

Deals & People July 28, 2023

Vestwell Acquires Student Loan Benefits Firm Gradifi From Morgan Stanley

The move adds student loan-related tools such as employee payment management and debt refinancing to the digital 401(k) provider’s platform.

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Small business and individual 401(k) provider Vestwell announced Friday it has agreed to acquire Gradifi Solutions, a student loan benefits provider, from Morgan Stanley.

The acquisition will add new student loan-related offerings to Vestwell’s platform, including programs to help employees manage and pay down student debt, contribute to education savings accounts and refinance student loans, according to the New York-based firm. Morgan Stanley inherited Gradifi when it acquired E*Trade Financial in 2020.

Gradifi provides participants with workplace education solutions, including financial literacy and student loan refinancing tools, as well as student loan repayment programs. Terms of the deal were not disclosed.

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“As millions of Americans carry student loan debt, it’s essential for employers to provide accessible tools and programs that enable individuals to pay down their student debt while saving for retirement simultaneously,” Aaron Schumm, founder and CEO of Vestwell, said in a statement. “Bringing Gradifi Solutions into Vestwell accelerates our product roadmap initiative alongside a top-tier client base. Through this acquisition, Vestwell is realizing its vision of enabling all savings in the workplace and beyond, with more offerings coming soon.” 

Vestwell’s announcement pointed out that, with the passage of the SECURE 2.0 Act of 2022, an employer can recognize an employee’s student loan payments as part of its retirement plan matching formula. That policy does not go into effect until 2024, with many experts predicting it will likely take longer for many plan sponsors to start implementing it.

Morgan Stanley expressed its support for the deal, as it is also building its workplace capabilities and offerings through Morgan Stanley at Work.

“We’ve partnered with Vestwell for white label recordkeeping, and we’re thrilled to extend that relationship through their acquisition of Gradifi,” Brian McDonald, head of Morgan Stanley at Work, said in a statement. “We look forward to bringing our clients and participants a more robust and comprehensive education savings offering as part of this deal.”

A federal student loan forgiveness program backed by the administration of President Joe Biden was cancelled earlier this year after a Supreme Court ruling that the program was unconstitutional.

 

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