At an SEC Investor Advisory Committee (the "Committee") meeting on September 9, 2021, SEC Chair Gary Gensler and SEC Commissioner Hester M. Peirce offered contrasting views on market regulation, particularly as to new technologies and financial products.
In his address, Chair Gensler focused on investor protection, highlighting concerns raised by the behavioral design of online trading platforms, the insider trading enforcement regime, and special purpose acquisition companies ("SPACs"). As to current digital engagement practices ("DEPs"), Mr. Gensler described inherent conflicts of interest between financial intermediaries and investors, particularly when DEPs are optimized for revenues which could affect investment recommendations. Mr. Gensler discussed the SEC's request for information and comment on the use of DEPs and asked for submissions from the Committee and other interested listeners. He noted the inherent biases of these business models should the underlying data reflect historical biases.
In addition, Mr. Gensler noted that the Committee's recommendations for plans under SEA Rule 10b-5 ("Employment of manipulative and deceptive devices") align with his previous request to SEC staff for proposed rulemakings. With regard to SPACs, Mr. Gensler stated that SPAC disclosures around dilution should be strengthened, and reported that the staff is developing rulemaking recommendations.
By contrast, Commissioner Peirce urged the Investor Advisory Committee to promote a regulatory process for digital platforms that considers investor opportunity as well as investor protection. Ms. Peirce contended that investors "at times may be willing to take on more risk than the regulator thinks is prudent," and so the regulatory process should not undercut an investor's ability to interact with the latest technologies, have access to new types of assets, and try new products and services. Ms. Peirce stated that a "healthy regulatory response" to such investor demand would not override investor decisions, but rather educate investors "using the same technologies through which they are investing."
An SEC request for information and comment on the use of digital engagement practices by broker-dealers and investment advisers was published in the Federal Register.
The SEC issued a request for information and comment on the use of digital engagement practices by broker-dealers and investment advisers.
The Office of Information and Regulatory Affairs identified the SEC's short- and long-term regulatory priorities in its Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.
In remarks before the Chief Financial Officer Network Summit, SEC Chair Gary Gensler reported that he directed staff to develop recommendations for revising SEC rules on insider trading.
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