Noted With Interest: AI In The Asset Management Space

AI in the Asset Management Space

Introduction

On July 26, 2023, the Securities and Exchange Commission ("SEC") proposed new rules under the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940 "to eliminate, or neutralize the effect of, certain conflicts of interest associated with broker-dealers' or investment advisers' interactions with investors through [the] use of technologies that optimize for, predict, guide, forecast, or direct investment-related behaviors or outcomes" (the "Proposed Rules"). The Proposed Rules would have far-reaching negative consequences not just for the asset management industry, but also the investors they serve. As explained below, the SEC's release fails to justify the need for such a sweeping and harmful set of rules; not only are the potential harms identified by the SEC framed only through the agency's imagined possibilities—as opposed to being grounded in reality—there is no reasonable justification for