Financial industry group warns SEC AI proposal would hurt retirement savers
A financial industry group Monday called on the SEC to withdraw a proposal targeting potential conflicts of interest related to the use of artificial intelligence by financial professionals because the regulation could harm retirement savers.
Under the rule proposal the Securities and Exchange Commission released in July, investment advisors and brokers who use artificial intelligence and predictive data analytics in interactions with clients and customers must “eliminate or neutralize” situations in which technology optimizes advisors’ or firms’ interests over those of the investor.
The rule would apply to “covered technology” that includes a firm’s use of “analytical, technological, or computational functions, algorithms, models, correlation matrices, or similar methods or processes that optimize for, predict, guide, forecast, or direct investment-related behaviors or outcomes of an investor,” the SEC said in a fact sheet.
The potentially wide reach of the rule has drawn widespread criticism across the financial industry. The ERISA Industry Committee, which represents retirement plan sponsors, said the rule would apply to a “vast swath of tools” that investors rely on daily, including those related to helping investors save for retirement.
“The proposed rule should be withdrawn,” Andy Banducci, senior vice president of retirement and compensation policy at the ERISA Industry Committee, wrote in a comment letter Monday.
The SEC rule would subject technology-based financial wellness programs for retirement plan participants to “broad new review and documentation requirements,” Banducci said in a related statement.
If the rule is implemented, financial firms will likely offer less useful information and “participating
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