SEC Proposes Requirements for Use of Data Analytics

The Securities and Exchange Commission has released a proposed rule that would require broker-dealers and investment advisers to take certain steps to address conflicts of interest associated with use of predictive data analytics.

According to a fact sheet, the proposal would require a firm to evaluate any use or reasonably foreseeable potential use by the firm or its associated persons of a covered technology in any investor interaction to identify any conflict of interest associated with that use. Firms would be required to determine whether any such conflict-of-interest places or results in placing the firm’s or its associated person’s interest ahead of investors’ interests. The proposal would require a firm to eliminate or neutralize the effect of any conflicts of interest that place the firm’s or its associated person’s interest ahead of investors’ interests. Additionally, the proposal would require a firm that has any investor interaction using covered technology to have written policies and procedures reasonably designed to achieve compliance with the proposed rule.

There is a 60-day comment period upon publication in the Federal Register.