The U.S. Securities and Exchange Commission (the SEC) proposed new rules for broker-dealers and registered investment advisers (RIAs) on Wednesday, July 26, 2023 that are intended to address potential conflicts of interest arising from the proliferation of new artificial intelligence (AI) tools and other predictive data analytics (PDAs). Proposed Rule 211(h)(2)-4 under the U.S. Investment Advisers Act of 1940 (the Advisers Act) would require RIAs to identify and eliminate, or neutralize the effect of, certain conflicts of interest associated with use of PDA-like technologies.
The SEC simultaneously proposed a similar rule for broker-dealers – proposed Rule 151-2 under the U.S. Securities Exchange Act of 1934 (the 1934 Act) – as well as corresponding changes to the recordkeeping requirements for broker-dealers and RIAs.
Authors: Madelyn Healy Joseph, Kevin Lees, David A. Winter, Adam M. Brown, Bryan R. Ricapito, Parikshit Dasgupta, Henry D. Kahn
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