The Investment Advisers Act’s three-part test catches more products than founders think. The SEC’s 2024 AI-washing sweep ($400K in settlements) and FINRA’s ongoing actions against retail AI-trading tools both apply to vibe-coded products. Comply Code flags the personalisation language and Marketing-Rule patterns that have triggered those enforcement actions.
Three-part test: advice + securities + compensation = adviser. Registration with SEC (>$100M AUM) or state (below) required unless an exception applies.
Governs how advisers can market themselves. AI-washing, guaranteed returns, cherry-picked performance, undisclosed testimonials all per-se violations.
If you handle securities transactions (not just advice), FINRA broker-dealer registration and Rule 2210 communications standards apply.
States enforce in parallel with the SEC. The 2024 NASAA alert on AI investment advice presages coordinated state action.
Federal layer for deceptive marketing. The AI-washing theory applies independently of SEC registration.
If your product custodies, transfers, or facilitates user funds, state money-transmitter licensing applies in most states.
Under Section 202(a)(11) of the Investment Advisers Act of 1940 (per SEC Release IA-1092), the test is three-part: (1) you provide advice or recommendations, (2) about securities, (3) for compensation. If 'yes' to all three, you're an investment adviser by default — registration with the SEC (AUM > $100M) or your state (below that) is required unless an exception applies. Subscription fees count as compensation; ad revenue counts; affiliate commissions count.
In March 2024, the SEC settled with both registered investment advisers for falsely claiming AI-powered investment processes. Delphia paid $225K, Global Predictions $175K — under the SEC Marketing Rule (Rule 206(4)-1) for material misstatements about their AI capabilities. The cases are precedent-setting because they apply standard anti-fraud principles to AI-capability claims: 'AI-washing' is enforceable on the same theory as any other false marketing claim, regardless of registration status.
Only if you can substantiate it. The SEC's 2024 AI-washing sweep targeted specifically the gap between AI marketing and AI reality. If your product has genuinely AI-driven analysis (and you can document the methodology), you can describe it as such with appropriate methodology disclosure. If 'AI' is a marketing-side overlay on a rules-based system, the framing is the kind of overclaim the SEC has been enforcing against.
Lowe v. SEC (1985) established that bona fide publishers of general-circulation financial newsletters are excluded from the Investment Advisers Act. The exemption is narrower than founders assume: the publication must be bona fide, general-circulation (not personalised), not promoting specific securities for compensation, and not coercive in tone. Most chatbot-style products fail at 'not personalised' because personalisation is the value prop. The Motley Fool model (general-circulation, educational, no personalised advice) does fit; an AI chatbot answering 'what should I do with my $50K' does not.
Yes — increasingly. The SEC's enforcement position is that most tokens are securities under the Howey test. AI crypto-recommendation products face Investment Advisers Act exposure on the same theory as AI stock-recommendation products. Additionally, state money-transmitter licensing may apply if you touch user funds, and FinCEN registration applies if you facilitate exchanges. The crypto-specific layer adds, it doesn't replace.
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