In a recent decision, the US District Court for the Southern District of N1 This case sheds light on the scope of the exclusion in the digital age and, in a regulatory area with limited guidance, offers recent and valuable insights for financial publishers and content platforms.
The plaintiffs alleged that Seeking Alpha operated as an unregistered investment adviser, violating both federal and state laws. They sought rescission of their subscription contracts and restitution of fees paid. However, the court found that Seeking Alpha's activities, as described in the complaint, fit squarely within the publisher's exclusion.
Seeking Alpha operates a website offering premium services to paying subscribers, including exclusive access to articles by independent authors, aggregated ratings from Wall Street analysts, and a proprietary "Quant Rating System." Subscribers can receive email alerts about ratings changes and recommendations for stocks in their portfolios, which they can link to the service. The platform also provides "Factor Grades" for thousands of securities, rating them on metrics like growth and profitability, and offers features such as stock screeners and comparison tools.
The Investment Advisers Act of 1940 (Advisers Act) defines an "investment adviser" broadly, b2 The Supreme Court, in its landmark&3
In analyzing Seeking Alpha's services, the court focused on two key factors:
- "Bona fide" nature of the publications — Relying on Lowe, the court found that Seeking Alpha's content was not personal communications, did not contain false or misleading information, and was not designed to tout securities in which Seeking Alpha had an interest.
- "General and regular circulation" — The plaintiffs argued based on specific language from Lowe that to meet the "general and regular circulation" test,4 5 In other words, the plaintiffs argued that publications must adhere to a strict, predictable schedule to qualify for the publisher's exclusion. The court rejected these arguments, specifically stating that the plaintiffs were reading Lowe too literally and t67 The court found that Seeking Alpha's frequent updates and real-time market coverage satisfied this requirement.
Importantly, the court distinguished Seeking Alpha's services from cases involving "auto-trading" programs, where publishers engaged in personalized communications with subscribers regarding investment advice and directly executed trades on behalf of subscribers. The court found that the plaintiffs failed to allege that Seeking Alpha had authority over subscriber funds or had been delegated decision-making authority over subscriber portfolios or funds.
The court also addressed the issue of customization. While Seeking Alpha allows subscribers to receive alerts and recommendations based on their portfolios, the court found that this feature merely filters generally available content rather than providing individualized advice that was created specifically for the plaintiffs. According to the court:
Plaintiffs cannot escape the publishers' exclusion by characterizing Seeking Alpha's publications as 'customized,' 'personalized,' and 'individualized.' . . . [T]hese features merely allow the subscriber to filter generally available content that would be visible to any subscriber who looks for it or who signs up for the same alerts. That someone can create a unique filter based on his or her own personal mix of investments does not support a plausible inference that impersonal, disinterested, and generally available content becomes individualized and personal as soon as it is caught by the filter.8
Final Thoughts
This case is an example of a court looking beyond surface-level customization to determine whether a publication truly provides personalized advice. This decision also provides some reassurance to financial content platforms and publishers of financial information that offer subscription-based services with customizable features. Notwithstanding, persons who rely on the publisher's exclusion under the Advisers Act, including operators of auto-trading platforms, index providers,9 and providers of quantitative or other model portfolios should remain vigilant in structuring their services to avoid crossing the line into regulated investment advisory activities.
Footnotes
1 Lingley et al v. Seeking Alpha, Inc., No. 1:23-cv-05849 (S.D.N.Y. Aug. 15, 2024).
2 15 U.S.C. § 80b-2(a)(11)(D).
3 Lowe v. SEC, 472 U.S. 181 (1985).
4 Lingley at 11-12 (quoting Lowe) (internal quotations omitted).
5 Id. at 10.
6 Id. at 13.
7 Id. at 11 (quoting Lowe) (internal quotations omitted).
8 Id. at 15.
9 "I understand that the question of whether an index provider is an investment adviser or a fund adviser might appear to be settled. Under the Advisers Act, I believe index providers have historically concluded that, even if they are investment advisers, they may rely on the publisher's exclusion from the definition of 'investment adviser.' However, recent developments appear to have moved certain index providers away from what we might think of as publishers." Dalia Blass, Director, Division of Investment Management, Remarks at the Investment Company Institute 2018 Mutual Funds and Investment Management Conference, SEC (Mar. 19, 2018), https://www.sec.gov/newsroom/speeches-statements/speech-blass-2018-03-19.
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