The SEC denied a no-action request that was submitted by Jonathon Hendricks. The no-action request inquired about a Wyoming based business that would make available a list of securities from a loan crowdfunding site that Mr. Hendricks’ proposed business perceived to be good investments. No representation is made in the no-action request that Mr. Hendricks is affiliated with the crowdfunding site. In addition, from the no-action request, there is no indication that the crowdfunding site sanctioned the use of information on the crowdfunding site.
The SEC stated the no-action request did not provide adequate facts and legal analysis for it to determine whether Mr. Hendrick’s new website business meets the definition of “investment adviser” in section 202(a)(11) of the Advisers Act, and if so, whether it meets the elements of an exclusion from that definition as provided under section 202(a)(11)(D) of the Advisers Act as suggested by Mr. Hendricks. The exclusion referred to is available for a “publisher of any bona fide newspaper, news magazine or business or financial publication of general and regular circulation.” The United States Supreme Court has interpreted this “publisher’s exclusion” to include publications that offer impersonal investment advice to the general public on a regular basis.
The SEC staff response noted that it generally declines to express an opinion as to whether a person qualifies for the publisher exclusion because it is a factual and not a legal determination. The SEC provided relevant guidance to help Mr. Hendricks to determine whether the exclusion was available.
The SEC further noted if Mr. Hendrick’s new website business meets the definition of investment adviser but qualifies for the publisher’s exclusion, it would not be required to register with the Commission under Section 203(a) of the Advisers Act. If the new website business meets the definition of investment adviser but does not qualify for the publisher’s exclusion (or another exclusion) from the definition of investment adviser, it would appear that it would be required to register as an investment adviser with the Commission because the State of Wyoming — where Mr. Hendricks’ proposed business appears to have its principal office and place of business — does not regulate investment advisers. Wyoming is the only state that does not regulate investment advisers, thus triggering potential registration with the SEC.