SEC Chair Gensler Considers Investor Protection Implications Of Evolving Financial Technologies

In remarks before the European Parliament Committee on Economic and Monetary Affairs, SEC Chair Gary Gensler described investor protection implications of evolving financial technologies.

Mr. Gensler described a number of financial stability concerns related to predictive data analytics and digital engagement practices ("DEPs"). He raised questions as to: (i) the balance between investor protection and DEP optimization and data collection efforts; (ii) the effect of a platform's ability to optimize for profit (or some other measure of benefit to the platform) and the impact that may have on investment recommendations made or services provided by the platform; and (iii) the fair access and pricing implications of data analytics models. Mr. Gensler also expressed concern regarding the potential system risks posed by the widespread use of "deep learning models" to the extent that they encourage "herding into certain datasets, providers, or investments."