What: SEC voted in a split 3-2 decision on July 26th to release a proposal requiring the elimination or neutralization of conflicts related to conducting investor relations via artificial intelligence, predictive data analytics, etc.
Who: Proposed rules would apply to both Investment Advisers and Broker-Dealers
When: The proposal is currently open for comment. Initial comment period will close 60 following publication to the Federal Register (September 26th)
Why: Per the release, the proposal is designed to address situations where AI-driven technology places a firm’s interests ahead of the interests of customers, clients, and/or investors by optimizing, predicting, guiding, or directing their behavior to purchase certain investments, deploy strategies, or otherwise make investment-related decisions.
How: If adopted as written, the proposed rules will have implications for firms deploying AI solutions, and may impact or potentially come into conflict with existing suitability and Reg BI policies, procedures, and practices. Advisers and Broker-Dealers will need to examine relevant policies related to the identification, resolution, and disclosure of conflicts of interest, as well as all AI-driven investment practices and existing Reg BI and suitability practices.
CRC keeps its thumb on the pulse of the evolving regulatory landscape. Keep an eye out for additional information about the SEC’s AI-driven conflicts proposed rule, including updated proposals, rule finalization details, and CRC’s thoughts on how to ensure successful integration of new or updated rules within your firm’s existing regulatory compliance program.
Contact Mitch Avnet for further details: (646)346-2468 | mavnet@compliance-risk.com
