On March 15, the Financial Industry Regulatory Authority (commonly referred to as “FINRA”) issued a Report that emphasizes that offerings of digital investment advice requires sound governance and supervision, including effective means of overseeing the suitability of recommendations, conflicts of interest, customer risk profiles and portfolio rebalancing. The Report also outlines lessons for investors and states that training and education are crucial for financial professionals who use digital investment advice tools. FINRA is the regulatory authority that is responsible, under the supervision of the U.S. Securities and Exchange Commission, for the oversight of broker-dealers.
This Report is the most comprehensive commentary and guidance issued to date by any U.S. regulator regarding digital investment advice. It merits careful consideration.
Although the rules discussed in the Report apply directly to broker-dealers, rather than investment advisers, the Report addresses the duties applicable to investment management services provided by broker-dealers as well as investment advisers. Therefore, we expect that the principles and rules set forth in the Report are comparable to those that the SEC will apply to investment advisers that provide digital investment advice. Report. Press Release.