The SEC Division of Investment Management (the "Division") updated guidance on automated advisers (or "robo-advisors") that provide services directly to clients over the internet. The SEC Investor Bulletin provided a general description of robo-advisors and outlined issues to consider, such as the level of human interaction and fees, when deciding whether to invest through particular robo-advisors.
The updated guidance recommended that firms providing robo-advisor services comply with their obligations under the Investment Advisers Act by:
- adequately explaining their business models and the scope of advisory services to their clients;
- fulfilling their fiduciary duties using comprehensive questionnaires to gather client information, and providing commentary to clients to explain changes in investment strategy; and
- considering the implementation of additional written policies and procedures that address the unique aspects of their business models, such as the use of algorithmic code, cybersecurity threats and marketing through social media, when developing compliance programs.
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