Following a review of digital engagement practices used in the financial industry, the Securities and Exchange Commission plans to propose new rules in this area, according to Think Advisor.
The SEC has expressed concern over how game-like features and other tools including behavioral prompts, differential marketing, and other design elements designed to attract investors on digital platforms could encourage excessive trading. Among the features it cited were those associated with the mobile phone apps offered by brokers such as Robinhood Markets Inc. and Webull Financial.
The commission said that while these practices can be beneficial for access to markets and product choice, they also raise questions about whether investors are being adequately protected as they make their financial decisions. SEC Chair Gary Gensler has said the use of the digital technologies “may encourage investors to trade more often, invest in different products, or change their investment strategy.”
The new rules that will be proposed this year by the SEC are intended to impose restrictions on the use of these practices. Notice of the proposals was issued last week in the release of SEC’s agenda of regulatory actions. The SEC said the Division of Trading and Markets is considering recommending rules related to use of predictive data analytics, differential marketing and behavioral prompts, but no specific details were provided on the new proposals.
At Hyman Cotter PC, our attorneys fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. Additionally, we regularly monitor SEC, FINRA and other self-regulatory organization rule-making activities to help ensure that our clients are aware of any new policies, while assisting them in implementing any recommended changes. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
