New Bill Would Block SEC Predictive Data Analytics Rule

If implemented, the senators continued, “advisors and brokers would need to evaluate, test, and document all uses of technology in trading and client interactions to ensure conflicts of interests have been eliminated or neutralized, posing an enormous, and in some cases impossible, burden.”

Routine decisions “such as what color to use on an app could trigger manual compliance reviews, significantly impeding the accessibility of investing tools,” the senators said.

Predictive Data Analytics Rule a ‘Mess’

The controversial rule to address predictive data analytics was among a couple of rules on the SEC’s plate in 2023 that didn’t get finalized.

The rule “is really a mess,” Karen Barr, president and CEO of the Investment Adviser Association in Washington, told ThinkAdvisor in a recent interview.

The plan, intended to reduce conflicts of interest tied to firms’ use of artificial intelligence, would have “an impact on every single investment advisor whether or not they use AI,” and the SEC should withdraw it, Barr said.

The bill is supported by the American Council of Life Insurers, American Investment Council, American Securities Association, Alternative Investment Management Association, U.S. Chamber of Commerce, Financial Services Institute, Institute for Portfolio Alternatives, Insured Retirement Institute and the Investment Company Institute.

“The fact is the SEC proposal is flawed,” Eric Pan, president and CEO of the Investment Company Institute in Washington said Tuesday in a statement. “It would roll back the clock on technology that investors use every day, calling everything from the most sophisticated technologies to simple spreadsheets into question under the new conflict of interest standard, and would be almost impossible to comply with, inhibiting firms’ use of technology to better serve investors.”