September 2021 Issue: Opportunities and Challenges in the Regulatory Environment-Opportunities and Challenges in the Regulatory Environment by Stephen W. Hall

Opportunities and Challenges in the Regulatory Environment by Stephen W. Hall

Pdf Summary

Advocates for stable, fair, and transparent markets have mixed feelings about the Biden administration's approach. While there are daunting challenges in the financial markets, such as private securities offerings, curtailed shareholder rights, unfair trading venues, and gamification of retail investment, there is hope for regulatory solutions under the new leadership of Gary Gensler at the SEC.<br /><br />One priority issue is addressing conflicts of interest among financial advisors, which have cost clients real money. Rewriting the weak "Regulation Best Interest" rule is crucial to protecting investors and imposing a genuine fiduciary duty on advisors. While the SEC does not plan to undertake a new rulemaking for Reg BI, they can issue guidance, enforce existing provisions, and gather data on the harm caused by conflicts of interest.<br /><br />The SEC is also taking steps to protect retail investors from the dangers of gamification in trading platforms. These platforms use behavioral prompts and marketing techniques to induce frequent and addictive trading activity. The SEC intends to seek public comment on potential rules related to gamification and consider how Reg BI applies to these apps.<br /><br />Another focus is the role of environmental, social, and governance (ESG) factors in the capital markets. Investors are demanding more robust ESG disclosure from companies, as these factors increasingly determine sustainability and performance. The SEC has intensified its focus on ESG disclosure, including the consideration of rule amendments and enhancing registrant disclosures regarding climate-related risks and opportunities.<br /><br />Overall, advocates are optimistic about the potential for meaningful regulatory reform under the new administration. While there are challenges ahead, they will continue to watch, comment, and advocate to ensure that any proposals serve the interests of investors.

Keywords

stable markets

fair markets

transparent markets

Biden administration

financial markets

private securities offerings

shareholder rights

gamification of retail investment

Regulation Best Interest

ESG disclosure