New Bill Would Block SEC Predictive Data Analytics Rule
The Protecting Innovation in Investment Act would prevent SEC from finalizing, implementing or enforcing the controversial rule.
Sens. Ted Cruz, R-Texas, and Bill Hagerty, R-Tenn., introduced legislation Tuesday, the Protecting Innovation in Investment Act, to prevent the Securities and Exchange Commission from finalizing, implementing or enforcing its Predictive Data Analytics rule.
The senators maintain the bill would “protect innovation in investment” by preventing the rule from going into effect.
“New technologies over the last decade have allowed more Americans to access the stock market than ever before,” Cruz said in a statement. “By waging a war on technology, the SEC would hurt the very investors that it claims to be protecting — Americans saving for retirement. Our bill will halt this crusade in its tracks by making sure this rule never sees the light of day.”
The SEC, according to Hagerty, “should demonstrate the ability to securely manage its own technology before seeking to micromanage and hinder innovative technologies at private firms. I’m pleased to join this legislation that would block the SEC from enacting this ill-conceived rule.”
The rule, intended to address conflicts of interest caused by artificial intelligence and other technology, has received pushback since being proposed last July. It is expected to be finalized this year.
“American consumers will ultimately bear the cost of yet another SEC attempt to overregulate financial markets,” Hagerty said in the statement.
Cruz and Hagerty maintained that “while the title of the SEC’s rule mentions predictive data analytics, giving it the illusion of specifically targeting cutting edge technology, the definition of covered technology would capture everything from simple spreadsheets to artificial intelligence.”
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.”
