SIFMA, an association that represents broker-dealers, investment banks and asset managers, submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) in response to the SEC’s request for information on digital engagement practices, or DEPs, of investment advisors.
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“Used responsibly, DEPs provide significant benefits to retail investors, including enhanced access to customized products and services, lower costs, access to a broader range of products, better customer service, and improved compliance efforts leading to safer markets,” Kevin Carroll, SIFMA managing director and associate general counsel, wrote in the letter. “Certain DEPs also raise potential risks, highlighting the need to ensure investor protection in connection with their use. The existing, robust regulatory regime, however, amply addresses firms’ use of DEPs today, preserving their well-documented benefits, while appropriately managing potential risks.”
SIFMA said DEPs generally focus on communications to retail investors in the form of educational, informational, advertising, and marketing content, as well as potential recommendations.
“FINRA’s communications and related rules and guidance cover the former, and the SEC’s Regulation Best Interest covers the latter. Accordingly, new rules, guidance, or interpretations are not necessary or appropriate to address DEP use in our industry today,” Carroll continued in the letter. “In fact, such additional regulation may well have the effect of undermining its very purpose by limiting information and access to investment opportunities and educational tools by under-represented, less financially educated, and/or less affluent retail investors – the presumed beneficiaries of such prospective regulation.”
Carroll also noted that the request for comment period, which is only 30 days, is an insufficient timeframe for commenters to reasonably provide meaningful responses given the scope of the request. SIFMA urged the SEC to continue to receive and review comments following the close of the comment period.