South Dakota U.S. Sen. Mike Rounds is raising concern about a proposed rule that affects investment firms using emerging technologies.
The federal agency describes the rule as intentionally broad, but Rounds worries it goes too far.
The Securities and Exchange Commission proposed rule, announced in July, seeks to protect investors from harm that may arise from the rapid increase in use of predictive analytics and artificial intelligence.
The proposed rule prevents firms from presenting investment opportunities put together by new, advanced technologies—especially tools that predict, guide, forecast or direct investment behavior through retail investing apps like Robinhood or other broker-dealers.
The Securities and Exchange Commission said firms must eliminate conflicts of interest that place their interests ahead of investor’s interests.
Rounds—who sits on the Senate Banking Committee—worries the attempt to reign in the technology will cause current, successful uses of it to suffer. He worries it will also affect all investor interaction and disincentivize the use of technology.
“According to this proposal, you have to say, 'Oh, by the way we happen to have an interest in this one investment fund over here.’ You have to try and eliminate that from being a possible conflict that you would have to disclose," Rounds said. "All that does is limit the availability of that product from even being shown to the client.”
Rounds said he agrees with the original intent of the rule, which seeks to prevent companies from using artificial intelligence to manipulate customers who use retail investing apps. Instead, Rounds said the proposal is written in a such a convoluted way that it's impossible to enforce.
"Even if they did enforce it, it’s to the detriment not to the improvement of a relationship with a customer,” Rounds said.
Last month, Rounds co-moderated an artificial intelligence forum, which included top tech industry leaders like Elon Musk, Mark Zuckerberg and Bill Gates.
The public has until Oct. 10 to weigh in on the proposed rules.
