Page 25 - Investment Advisor June 2021

compelled to repay what others offer us. 5. Use the “door in the face” site of the better-known “foot in the
This is called the “reciprocity principle.” technique. door” approach. Why does “door in
In one study, restaurant waitstaff who If you want to persuade someone to the face” usually work? Psychologists
gave customers one or two after-dinner do something, you can greatly enhance say people don’t like saying no twice
mints with their checks got bigger tips. your chances of success by asking for in a row. Plus, the second request
Those who told customers “You guys something really big first. Odds are, appears more reasonable.
were great” and gave them a handful they’ll say no. And this is key: They’ll be I once watched my attorney nego-
of mints racked up the biggest tips of slightly uncomfortable saying no, even tiate my lease by making a series of
all. This makes sense. When we post though they shouldn’t feel bad. This improbable if not outrageous requests
on social media, for instance, aren’t we means they’re now primed to say yes to to the landlord. It paid off when the
often giving others useful information your smaller request. landlord later agreed to the less-oner-
and hoping they’ll respond by engaging Researchers call this “the door in ous provisions that my lawyer wanted
with us? the face” technique. It’s the oppo- in the first place.

SEC’s Reg BI Could be Modified, apps with these types of features con-
“We need to ensure investors using
Gensler Tells Lawmakers tinue to be appropriately protected and
consider how all of our rules apply in
these situations, including Regulation
ecurities and Exchange Commission Gensler also told lawmakers during Best Interest,” Gensler said.
SChairman Gary Gensler said May 6 the hearing that SEC staff “is vigorously Gensler also said that shortening the
that while the agency plans to “vigor- reviewing for any violations” the mar- standard settlement cycle from the cur-
ously get the most” out of Regulation ket volatility witnessed in January dur- rent T+2 “could reduce costs and risks
Best Interest, the agency will “constant- ing the Reddit GameStop short squeeze in our markets,” and that he’s directed
ly evaluate” how the rule is serving and that he’s directed staff to consider the SEC staff “to put together a draft
investors and it could be modified. whether “expanded enforcement mech- proposal for the commission’s review on
During a question-and-answer ses- anisms” are necessary. The securities this topic.”
sion at a hearing held by the House regulator, Gensler told lawmakers, plans As to the failure in late March of
Financial Services Committee on the to release this summer a report on the the family office Archegos Capital
run-up in GameStop shares earlier this market volatility spurred by the Reddit Management “and the significant loss-
year, Rep. Ann Wagner, R-Mo., que- GameStop incident. es incurred by several global financial
ried Gensler on whether he planned After Gensler described the event, institutions that provided prime bro-
to make “any amendments to Reg BI.” he added: “While entities such as kerage services to Archegos,” Gensler
Gensler responded: “I think that it’s GameStop, Melvin Capital, Reddit said he’s asked SEC staff to consider
important that investors actually have and Robinhood have garnered a sig- recommendations for the commission
brokers take their best interests at nificant amount of attention, the policy “about whether to include total return
heart, and that’s what we’re going to do issues raised by this winter’s volatility swaps and other security-based swaps
through examination and enforcement go beyond those companies. Instead, I under new disclosure requirements,
and guidance [to] ensure that that rule think these events are part of a larger and if so how.”
is fully complied with as written.” story about the intersection of finance Said Gensler: “At the core of that
Later in the hearing, Gensler stated and technology.” story was Archegos’ use of total return
that “we’re going to vigorously get the Gensler noted that while there’s “no swaps based on underlying stocks, and
most out of Regulation Best Interest, but settled definition of gamification, … significant exposure that the prime bro-
we’re also going to evaluate. If it’s not broadly, it refers to the use of game- kers had to the family office. Under
serving the purpose of investors then we like features … to increase customer Dodd-Frank, Congress gave the SEC
will update and freshen that rule as well engagement.” He’s asked the SEC staff rulemaking authority to extend benefi-
as other rules because we always have to “to prepare a request for public input cial ownership reporting requirements
be evaluating that investors come first, for consideration” on these gamifica- to total return swaps and other security-
aligned with our three-part mission.” tion issues. based swaps.”

JUNE 2021 INVESTMENT ADVISOR 23