Davis Polk partner Zach Zweihorn was quoted in the Wall Street Journal discussing a proposed rule by the SEC that would hold algorithms used by retail investment firms to predict, guide or forecast investors’ behavior, in certain cases, to a similar standard as investment advice. The article notes that the proposal – which stems from a two-year SEC review of Wall Street’s “digital engagement practices” – would expand the SEC’s oversight of broker and adviser conduct beyond outright recommendations.

“I think the SEC is trying to fill what it views as a gap,” said Zach. “Firms might use these technologies in interactions with customers, even in interactions that potentially ‘guide’ investor behavior, but not in a way that constitutes a ‘recommendation’ as that term has been interpreted.”

“Apps Like Robinhood Make Trading Fun, But SEC Fears It Is Costing Investors,” Wall Street Journal (July 26, 2023) (subscription required)

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