Registration Under IAA Required
One of the most controversial recent developments in money management is the web-based investment program. While these vary somewhat in their details, they essentially invite investors to invest online using a computer-generated template. Among the better-known web-based programs are Foliofn (formerly known as Folio[fn]) and Netfolio.com.
Foliofn is particularly prominent, with former SEC commissioner Steven Wallman at its head. The Investment Company Institute recently released a letter and memorandum it submitted in July to the SEC’s Division of Investment Management on Foliofn’s “folios,” which are baskets or portfolios of stocks that the investor purchases in a single transaction.
Under the ICI’s analysis, the folios are separate securities that should be registered under the Securities Act of 1933, and Foliofn’s investment program itself should be registered as an investment company under the Investment Company Act of 1940. Foliofn is registered as a broker-dealer but not as an investment adviser.
An ICI summary, with links to the letter and memorandum, is available at http://www.ici.org/economy/folio_cvr.html
The SEC reportedly is conducting a regulatory review of web-based investment portfolios. KPMG has prepared a news report and analysis, available at the address below. Free registration with KPMG Insider may be required. These are personalized collections of news stories in the areas of banking, insurance, and consumer markets, primarily from third-party sources such as Reuters but also including some KPMG-prepared materials.
Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, http://www.egroups.com/group/fundlaw. To subscribe to FundLaw, send a blank e-mail to firstname.lastname@example.org
Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.
Return to The Securities Law Home Page