rules and regulations

Following a surge in retail trading this year, the U.S. Securities and Exchange Commission (SEC) is considering rules to address the “gamification” of trading on mobile apps, yet critics say it’s missing the mark by seeking to undo work carried out under former U.S. president Donald Trump.

In its latest regulatory agenda, which sets out an array of short- and long-term actions the regulator is planning, the SEC said it’s considering measures to enhance retail investor protection.

For instance, the commission is considering potential rules to address “gamification, behavioural prompts, predictive analytics, and differential marketing.”

As retail trading has taken off, regulators and others have expressed concerns about certain mobile app features that encourage frequent trading.

Whether the SEC addresses the issue remains to be seen — work in this area is still at the “pre-rule” stage.

Other areas that are facing possible scrutiny include tougher investor protection in the exempt market; a possible consultation on the role of index providers and other third-party firms, and their implications for the asset management industry; and possible rules to combat fraud and manipulation in the security-based swaps market.

These potential new areas for SEC action are in addition to its existing rule making efforts in an array of areas, including climate risk disclosure, board and workforce diversity, market structure modernization, and enhancing shareholder democracy.

There are also some unfinished initiatives stemming from the post-crisis reform efforts that are still in the works, including rules on incentive-based compensation arrangements and conflicts of interest in securitizations.

“To meet our mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation, the SEC has a lot of regulatory work ahead of us,” said SEC chair Gary Gensler in a statement.

However, the proposed agenda is coming under fire from a couple of the SEC’s conservative commissioners — Hester Peirce and Elad Roisman — who issued a joint statement saying the agenda is missing some important priorities, “including rules to provide clarity for digital assets, allow companies to compensate gig workers with equity, and revisit proxy plumbing.”

These omissions may reflect the fact that the SEC is also looking to scrap some of the work done under the previous administration, they suggested.

“The agenda makes clear that the chair’s recent directive to SEC staff to consider revisiting recent regulatory actions taken with respect to proxy voting advice businesses was not an isolated event, but just the opening salvo in an effort to reverse course on a series of recently completed rulemakings,” they said.

Peirce and Roisman pointed to several proposals on the SEC’s new agenda that would revisit rules adopted in the past year.

“As far as we can tell, the agency has received no new information which would warrant opening up any of these rules for further changes at this time. We are disappointed that the commission would dedicate our scarce resources to rehashing newly completed rules,” they said.

While they acknowledged that it’s natural for the SEC to change tack under a new administration, they said, “reopening large swathes of work that was just completed without new evidence to warrant reopening is not normal practice,” and suggested that this undermines the SEC’s reputation as a steady regulator.

“We hope chair Gensler will reconsider the need to revisit freshly minted rules, but we look forward to working with him and our fellow commissioners on other rulemaking initiatives reflected on the agenda and on addressing issues of perennial importance such as elder investor fraud and small business capital formation,” they concluded.