(Reuters) – The US Securities and Exchange Commission will seek input on whether innovations in digital customer engagement used by financial companies should be governed by existing rules or may need new ones, Commission President Gary Gensler told Reuters.
While the SEC's thinking on the subject is at an "early stage", its rules may need to be updated to account for an artificial intelligence-led revolution in predictive analytics, differential marketing and behavioral issues aimed at optimizing customer engagement, he said. .
The SEC plans to launch a wide-ranging consultation in the coming days that could have major consequences for retail brokers, asset managers and robo-advisors, who are increasingly using such tools to drive customers to higher-income products.
"We are in a time of change. I really believe that data analytics and AI can bring many positive things, but that means we should look back and think about what this means for user interfaces, user engagement, justice and bias," he said. Gensler. "What does that mean for rules written in an earlier era?"
The consultation was triggered in part by January & # 39 ;s meme stock story, resulting in an intensive review of retail brokerage practices, including "gamification" game-like prompts designed to optimize customer engagement.
Mr. Gensler told Congress during a May hearing on the saga that the SEC would seek public input on gamification.
He now says that the agency should examine the spectrum of digital engagement. Although such functions may increase consumers' access to capital markets, they may also expose them to increased risks.
Some behavioral issues may be considered investment advice and regulated as such, he added.
"These digital engagement methods raise questions about when marketing becomes affordable, when is it a recommendation, what is the duty of care?" Said Gensler, a former professor at MIT where he taught financial technology classes.
Mr. Gensler reiterated a growing concern among regulators that such tools could perpetuate discriminatory behavior. With certain marketing methods, for example, companies adapt product offers and prices to customer preferences and profiles.
"The data that comes into this data analysis, whether it is machine learning or deep learning, will represent the prejudices in society that they already exist, he said.
Since becoming SEC chairman in April, Gensler has put forward an ambitious agenda with new climate change and personnel-related revelations, cracks in the boom in specialty companies, or SPAC, business, and increasing scrutiny of U.S. listings of Chinese companies.
Mr. Gensler said that the SEC's planned new SPAC rules would increase disclosure, particularly regarding business costs and how investors would be diluted at a later stage.
Wall Street's biggest gold rush in recent years; acquire a private company and take it publicly, which means that cases can circumvent the more onerous statutory controls of an IPO.
But some A critic says that investors at a later stage are deceived by SPAC sponsors, who are also early investors.
"Think of the cost in each step: initially the sponsorship fees, the subscription fees, the attorney fees. It all becomes a very intensive and costly process," says Gensler.