The Securities and Exchange Commission published guidance for investors and financial services firms on the use of robo-advisers with suggestions on meeting disclosure, suitability and compliance obligations.
“As technology continues to improve and make profound changes to the financial services industry, it’s important for regulators to assess its impact on U.S. markets and give thoughtful guidance to market participants,” SEC acting chairman Michael Piwowar said.
“This information is designed to help investors tap into the opportunities that fintech innovation can provide while ensuring fairness and investor protection,” Piwowar said.
Robo-advisers are registered investment advisers that use computer algorithms to provide investment advisory services online with often limited human interaction. The SEC notes that not all of the issues addressed in the guidance will be applicable to every robo-adviser.
The guidance was drafted by the SEC’s Division of Investment Management with contributions from Rochelle Kauffman Plesset and Robert Shapiro.
Also, the SEC’s Office of Investor Education and Advocacy published a bulletin that provides individual investors with information to make informed decisions when using robo-advisers. The bulletin says investors should consider the level of human interaction important to the investor, the information the robo-adviser uses in formulating recommendations, the robo-adviser’s approach to investing, and the fees involved.
Owen Donley, Jill Felker and Holly Pal from the Office of Investor Education and Advocacy contributed to the bulletin.