In response to an SEC request for comment on broker-dealer and investment adviser digital engagement practices ("DEPs"), SIFMA asserted that existing regulations are sufficient to address potential misconduct.
In its letter, SIFMA emphasized that DEPs are subject to existing compliance and regulatory requirements for broker-dealers and investment advisers which adequately address such risks. These include (i) disclosure and financial reporting and recordkeeping requirements, (ii) anti-fraud provisions under FINRA's rules and the Investment Advisers Act, respectively, (iii) mandatory compliance program requirements, and (iv) privacy and cybersecurity requirements. In addition, SIFMA raised the potential application of Regulation Best Interest to the use of DEPs to provide recommendations.
SIFMA stated that DEPs facilitate and improve retail investors' investment experience because they offer the newest technologies, educational resources and data at retail investors' "digital fingertips." SIFMA argued that DEPs can promote "positive, beneficial investor behaviors" by tailoring investor education to an investor's objectives and risk tolerance. SIFMA acknowledged that certain DEPs might push investors to engage in practices that do not align with their investment objectives and risk tolerance, including (i) frequent trading and (ii) trading in options, on margin or in complex securities products.
SIFMA was critical of the short comment deadline, pointing to the SEC's 91 questions and 30-day response deadline. Citing its earlier request for a comment period extension, SIFMA stated that commenters "cannot reasonably provide meaningful responses within that timeframe," adding it would not be possible to "collect and synthesize industry-wide data and information about the use of DEPs" by the current deadline.
Primary Sources
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
