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SEC Seeks Info on Digital Engagement by Investment Advisors, Brokers

August 30, 2021 by Dan McCue
The U.S. Securities and Exchange Commission in Washington, D.C. (Photo by Dan McCue)

WASHINGTON – The Securities and Exchange Commission is seeking information from the public and industry professionals on the digital engagement practices of investment advisors and brokers.

These tools include behavioral prompts, differential marketing, game-like features (also known as gamification) and other design elements used to engage retail investors on digital platforms. 

“While new technologies can bring us greater access and product choice, they also raise questions as to whether we as investors are appropriately protected when we trade and get financial advice,” said SEC Chair Gary Gensler in a written statement. 

“In many cases, these features may encourage investors to trade more often, invest in different products, or change their investment strategy,” Gensler continued. “Predictive analytics and other DEPs often are designed with an optimization function to increase revenues, data collection, or customer time spent on the platform. This may lead to conflicts between the platform and investors.”

The commission issued a request for comment, in part, to develop a better understanding of the market practices associated with firms’ use of DEPs and the related analytical and technological tools and methods. 

The Commission also is hoping to learn what conflicts of interest may arise from optimization practices and whether those optimization practices affect the determination of whether DEPs are making a recommendation or providing investment advice.

The request also is intended to provide a forum for market participants, including investors, and other interested parties to share their perspectives on the use of DEPs and the related tools and methods. 

The public comment period will remain open for 30 days following publication of the Request in the Federal Register. The Commission encourages retail investors to comment on their experiences by submitting a Feedback Flyer, available here.

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