Page 29 - Investment Advisor - December 2021

thing from the regulation of clear, and there’s little doubt that
cryptocurrency, the agency’s investors are better off today than
Regulation Best Interest, as well they were previously … You have
as problems he sees with digital brought on staff with a clear public
engagement platforms. record of opposing Reg BI. You can
In remarks at the Securities understand how that would give
Industry and Financial Markets the investing public the impres-
Association’s annual confer- sion that the SEC under your lead-
ence, held virtually in October, ership is not committed to Reg BI.”
Gensler reiterated his views that She reminded Gensler of his
what’s important for the SEC previous comments during his
now regarding crypto trading and confirmation hearing that he was
lending platforms is ensuring that committed to working with SEC
the investing public is protected. staff to ensure Reg BI “’lived up to
In this new crypto area, its best-interest label.’”
Gensler stated, “there’s a lot of hype and investors reaching Wagner asked Gensler: “Do you still commit to fully sup-
for yield who are hoping to have a little bit better future; porting the continued implementation of Reg BI?”
but these platforms generally have not come in to either the Gensler responded: “That is as true today as when I said it.
CFTC or SEC [oversight] to be within an investor protection This will ensure that our regulations, Regulation Best Interest,
framework.” and others, live up to what is written down on the page.”
The SEC, Gensler said, is “going to be very active trying to During his confirmation hearing, however, Gensler also
bring this [crypto] market into what I’ll call the investor pro- stated that the agency will “constantly evaluate” how Reg BI
tection framework.” is serving investors and that it could be modified.
Gensler this year also has questioned when design ele- “If the rule doesn’t work, ultimately, we are going to look to
ments and psychological nudges associated with digital make sure that brokers ensure that the investing public truly
engagement platforms, or DEPs, “cross the line” and become gets best interest,” Gensler told lawmakers.
recommendations.
“The answer to that question is important, because that
might change the nature of the platform’s obligations under the Investment advisors will face major changes in how they can
securities laws,” Gensler said at the Practising Law Institute’s advertise and market their services next year thanks to a new
SEC Speaks event. Securities and Exchange Commission rule that went into
“Even if certain practices might not meet the current defi- effect in May.
nition of recommendation, I believe they raise a question as Former SEC Chairman Jay Clayton said when the rule passed
to whether there are some appropriate investor protection that the new “comprehen-
guardrails to consider, beyond simply the application of anti- sive framework for regu-
fraud rules,” Gensler said. lating advisors’ marketing
These modern DEP features, Gensler continued, “go beyond communications recog-
game-like elements, or what is sometimes called ‘gamification.’ nizes the increasing use
They encompass the underlying predictive data analytics, as of electronic media and
well as a variety of differential marketing practices, pricing mobile communications
and behavioral prompts.” and will serve to improve
the quality of information
Gensler told lawmakers this year that he remains commit-
Gensler: Melissa Lyttle/Bloomberg advisor. Roper, the former director of investor protection for said, provides for “an extended compliance period intended to
ted to continuing to implement Reg BI as it’s “written down.”
available to investors.”
On Aug. 25, Gensler appointed Barbara Roper as his senior
The new rule, Clayton
provide advisors with a sufficient transition period, including
the Consumer Federation of America, has been a vocal critic
to enable consultation with the Commission’s expert staff.”
of Reg BI.
Registered investment advisors view the new marketing
During a question-and-answer session with Rep. Ann
and advertising rule as the “hottest” compliance topic in 2021,
Wagner, R-Mo., at an SEC oversight hearing held by the
according to an Investment Adviser Association poll.
House Financial Services Committee, Wagner stated that
The SEC’s advertising and marketing rule has been in effect
“the benefits of Reg BI to the capital markets are abundantly
DECEMBER 2021 INVESTMENT ADVISOR 27