Investment Advisory Agreement in New York: Software Startup

The client was a New York–based startup developing software designed to provide data-driven investment insights to users.

The platform relied on algorithms to analyze market data and generate portfolio-related information.

As the product neared launch, the founders became concerned that offering such services might constitute regulated investment advisory activity.

To address this uncertainty, the company sought legal guidance focused on whether its planned Investment Advisory Agreement structure would require registration.

Under U.S. Law, certain financial services require registration at the federal or state level.

The client specifically asked whether entering into an Investment Advisory Agreement with users could classify the company as an investment adviser.

Failure to properly assess this issue could expose the startup to civil penalties and enforcement actions.

Accordingly, a formal legal opinion was requested to evaluate registration requirements under applicable New York and federal law.

Under the federal Investment Advisers Act of 1940, entities providing investment advice for compensation may be required to register with the SEC or state authorities.

In New York, additional oversight is exercised through state securities regulations and the Martin Act.

Legal counsel analyzed whether the client’s Investment Advisory Agreement would involve personalized advice or discretionary authority over client assets.

This distinction was central to determining regulatory status.

The analysis focused on whether the software merely provided general, non-tailored information or crossed into individualized investment advice.

Counsel reviewed the platform’s functionality, marketing language, and proposed Investment Advisory Agreement terms.

Particular attention was given to the absence of discretionary trading authority and the automated nature of outputs.

These factors weighed heavily against classification as a regulated advisory service.

After mapping the business model against statutory definitions, counsel concluded that the client did not fall within the scope of a registered investment adviser.

The Investment Advisory Agreement was structured to emphasize informational content rather than personalized recommendations.

Clear disclaimers and limitations were incorporated to reinforce this position.

As a result, registration with New York or federal authorities was not required at the time.

Even where registration was not required, counsel recommended safeguards to reduce future risk.

The Investment Advisory Agreement was revised to restrict how users could rely on the software’s outputs.

Language was added to prevent implied fiduciary obligations.

These measures ensured that the agreement aligned with evolving regulatory expectations.

With the legal opinion in hand, the client moved forward with its product launch.

The clarified Investment Advisory Agreement allowed the company to engage users without triggering licensing requirements.

This outcome significantly reduced compliance costs and administrative burden.

The startup was able to focus on innovation and market entry.

In addition to immediate guidance, counsel provided recommendations for ongoing monitoring.

As the business evolves, changes to the Investment Advisory Agreement or service scope could alter regulatory status.

The client implemented internal review procedures to reassess compliance as new features are introduced.

This proactive approach positioned the company for sustainable growth.

SJKP advises fintech and investment technology companies on Investment Advisory Agreement matters in New York, including regulatory classification and compliance strategy.

Our team provides tailored legal opinions, contract drafting, and ongoing advisory support aligned with U.S. And New York securities law.

If your business is developing financial software or advisory platforms, contact SJKP to schedule a consultation and obtain clear guidance on your Investment Advisory Agreement obligations.