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.”

(more…)