SEC Request for Information and Comment on Digital Engagement Practices
Summary
SIFMA provided comments to the Securities and Exchange Commission (SEC) in response to their ‘Request for Information and Comments on Broker-Dealer and Investment Adviser Digital Engagement Practices, Related Tools and Methods, and Regulatory Considerations and Potential Approaches; Information and Comments on Investment Adviser Use of Technology to Develop and Provide Investment Advice’.
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Excerpt
October 1, 2021
Via e-mail to [email protected]
U.S. Securities and Exchange Commission
100 F Street, NE
Washington DC 20549-1090
Attn: Ms. Vanessa A. Countryman
Re: SEC Request for Information and Comment on Digital Engagement Practices; File No. S7-10-21
Dear Ms. Countryman:
The Securities Industry and Financial Markets Association (“SIFMA”) (1) appreciates the opportunity to comment on the SEC’s “Request for Information and Comments on Broker-Dealer and Investment Adviser Digital Engagement Practices, Related Tools and Methods, and Regulatory Considerations and Potential Approaches; Information and Comments on Investment Adviser Use of Technology to Develop and Provide Investment Advice” (the “Request”). (2)
The SEC defines digital engagement practices (“DEPs”) to include the following nine categories of practices purportedly engaged in by broker-dealers and investment advisers: (i) social networking tools, (ii) games, streaks and other contests with prizes, (iii) points, badges and leaderboards, (iv) notifications, (v) celebrations for trading, (vi) visual cues, (vii) ideas presented at order placement and other curated lists or features, (viii) subscriptions and membership tiers, and (ix) chatbots.
Notably, although these nine categories are labeled as DEPs, many of them may be – and in fact historically have been – implemented in a non-digital manner. In this regard, many DEPs may be viewed as the natural evolution of, and an improvement upon, long standing, conventional means of customer engagement, advertising, and education. (3)
With respect to DEPs, the Request seeks feedback regarding: (A) firms’ use of and practices concerning DEPs, (B) the analytical and technological tools and methods that underpin firms’ use of DEPs, and (C) whether additional regulation is required for DEPs (collectively, the “DEP Request”). (4) Following is SIFMA’s response to the DEP Request (5):
1. SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate on legislation, regulation, and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.
2. Release Nos. 34-92766; IA-5833; File No. S7-10-21 (August 27, 2021), available at https://www.sec.gov/rules/other/2021/34-92766.pdf. The Request was published in the Federal Register on September 1, 2021. See 86 Fed. Reg. 49067 (Sept. 1, 2021), available at https://www.govinfo.gov/content/pkg/FR2021-09-01/pdf/2021-18901.pdf.
3. See FINRA Report, Artificial Intelligence (AI) in the Securities Industry (June 2020) (“FINRA Report on AI”), available at https://www.finra.org/sites/default/files/2020-06/ai-report-061020.pdf.
4. Request at Section II, Parts A, B, and C.
5. This response does not address Section III of the Request. Section III seeks information about investment advisers’ use of technology to develop and provide investment advice. We reserve the opportunity to provide industry feedback on Section III at a later date.