ANALYSIS: Does SEC Really Need a New Conflict-of-Interest Rule?

Technological advancements, like the development of predictive data analytics (PDA) and other forms of artificial intelligence (AI), are changing how investment advisers and broker-dealers interact with investors. The tech may improve returns for investors by reducing costs or yielding better investment advice. However, conflicts of interest baked into underlying algorithms could harm clients if their use isn’t properly managed, leading the Securities and Exchange Commission to reevaluate the sufficiency of the current regulatory framework in the securities market.

Indeed, the SEC proposed new rules on July 26, 2023, to guard against these increased risks associated with AI. But the SEC ...