SEC Proposes Sweeping New Rules on Use of Data Analytics by Broker-Dealers and Investment Advisers
On July 26, 2023, the U.S. Securities and Exchange Commission (SEC or Commission) proposed new rules for broker-dealers (Proposed Rule 15(1)-2) and investment advisers (Proposed Rule 211(h)(2)-4) on the use of predictive data analytics (PDA) and PDA-like technologies in any interactions with investors.1 However, as discussed below, the scope of a “covered technology” subject to the rules is much broader than what most observers would consider to constitute predictive data analytics. The proposal would require that anytime a broker-dealer or investment adviser uses a “covered technology” in connection with engaging or communicating with an investor (including exercising investment discretion on behalf of an investor), the broker-dealer or investment adviser must evaluate that technology for conflicts of interest and eliminate or neutralize those conflicts of interest. The proposed rules would apply even if the interaction with the investor does not rise to the level of a “recommendation.”
European Parliament Adopts AI Act Compromise Text Covering Foundation and Generative AI
On 14 June 2023, the European Parliament adopted – by a large majority – its compromise text for the EU’s Artificial Intelligence Act (“AI Act”), paving the way for the three key EU Institutions (the European Council, Commission and Parliament) to start the ‘trilogue negotiations’. This is the last substantive step in the legislative process and it is now expected that the AI Act will be adopted and become law on or around December 2023 / January 2024. The AI Act will be a first-of-its-kind AI legislation with extraterritorial reach.
