Feedback requested on digital engagements from brokers and advisors


On August 27, 2021, the SEC requested information and public comment on the use of digital engagement practices (DEP) by brokers and investment advisers. DEPs include things like behavioral prompts, differential marketing, gamification features, and other items or functionality designed to engage retail investors on digital platforms such as websites, portals, and apps, and by providing asset management services through “robo-advice” or the use of algorithm-based platforms. The SEC encouraged industry market players and retail investors to share their views on the use of DEPs.

In the request for comment, the SEC expressed its desire to understand and assess:

  • the extent to which companies use DEPs;

  • the most frequently used types of PED;

  • the tools and methods used to develop and implement DCs; and

  • information relating to retail investor engagement with DEPs, including all data relating to investor demographics, trading behavior and investment performance.

In an attached press release, the SEC said the request for comment will facilitate the SEC’s assessment of existing regulations and consideration of the need for regulatory action.

Although the comment period is over, the SEC’s request demonstrates the SEC’s interest in DEPs in light of the recent “meme equity investment” that has occurred in stocks such as AMC Entertainment and GameStop plus early this year. The demand was also foreshadowed by the testimony of SEC Chairman Gary Gensler to Congress in May 2021 on “investing in stocks meme” and its connection to easy-to-use trading apps and easy-to-use trading. artificial intelligence tools and other algorithms to organize investor experiences. Overall, it appears the SEC is trying to assess the use by brokers and investment advisers of digital platforms designed to provide retail investors with better market access and product choice, and the bias potential that these platforms and DEP can have to increase revenue, collect data and track and affect the time that a customer spends on any platform.

There has already been a retreat from the industry through the public consultation process. SIFMA, the industry trade group that represents market players, said the existing regulatory framework of SEC and FINRA rules already addresses the use of PEDs and therefore any new rule, guidance or interpretation would be unnecessary to regulate the use of EPDs.

The SEC press release announcing the request for information and public comment is available here.

© 2021 Vedder PriceRevue nationale de droit, volume XI, number 288


About Author

Comments are closed.