The U.S. Securities and Exchange Commission’s (SEC) published an investor bulletin along with revised investment industry guidance on Thursday on the fast-growing robo-advisor sector.
The updated guidance from the SEC’s division of investment management aims to address the “unique issues” robo-advisors raise, with suggestions for meeting their disclosure, suitability and compliance obligations.
The guidance notes that robo-advisors are typically registered as investment advisors, which makes them subject to the fiduciary and other obligations under U.S. securities law. Furthermore, the guidance indicates there “may be a variety of means” for firms to meet these obligations.
At the same time, the SEC’s office of investor education and advocacy published an investor bulletin that aims to alert investors to several issues that they should consider when deciding whether to use a robo-advisor, including: the level of human interaction they are comfortable with, the information robo-advisors use to formulate recommendations, and fees and charges, among other considerations.
“As technology continues to improve and make profound changes to the financial services industry, it’s important for regulators to assess its impact on U.S. markets and give thoughtful guidance to market participants,” says Michael Piwowar, acting chairman of the SEC, in a statement. “This information is designed to help investors tap into the opportunities that fintech innovation can provide while ensuring fairness and investor protection.”
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