U.S. Sens. Ted Cruz (R-TX) and Bill Hagerty (R-TN) today introduced legislation that would block a rule from the Securities and Exchange Commission (SEC) related to technology in investing.
In July of last year, the SEC proposed a rule that would strongly deter the use of technology in investing. The Protecting Innovation in Investment Act (S.3735) would prevent this rule from being finalized and going into effect later this year.
“New technologies over the last decade have allowed more Americans to access the stock market than ever before,” Cruz said. “By waging a war on technology, the SEC would hurt the very investors that it claims to be protecting — Americans saving for retirement. Our bill will halt this crusade in its tracks by making sure this rule never sees the light of day.”
While the title of the SEC’s rule mentions predictive data analytics, the definition of covered technology would capture everything from simple spreadsheets to artificial intelligence (AI). If implemented, advisors and brokers would need to evaluate, test, and document all uses of technology in trading and client interactions to ensure conflicts of interests have been eliminated or neutralized. This would pose an enormous, and in some cases impossible, burden, the lawmakers said. Routine decisions could trigger manual compliance reviews, thus impeding the accessibility of investing tools.
“American consumers will ultimately bear the cost of yet another SEC attempt to overregulate financial markets,” Hagerty said. “The agency should demonstrate the ability to securely manage its own technology before seeking to micromanage and hinder innovative technologies at private firms. I’m pleased to join this legislation that would block the SEC from enacting this ill-conceived rule.”
The Protecting Innovation in Investment Act would prevent the SEC from finalizing, implementing, or enforcing its rule or any rule that is substantially similar.
The legislation has support from various stakeholders, including the American Council of Life Insurers (ACLI), American Investment Council (AIC), American Securities Association (ASA), Alternative Investment Management Association (AIMA), U.S. Chamber of Commerce, Financial Services Institute, Inc. (FSI), Financial Technology Association (FTA), Institute for Portfolio Alternatives (IPA), Insured Retirement Institute (IRI), Investment Company Institute (ICI), Loan Syndications and Trading Association (LSTA), MFA, National Association of Insurance and Financial Advisors (NAIFA), National Bankers Association (NBA), and Securities Industry and Financial Markets Association (SIFMA).