SEC Commissioner Targets Robos and ETFs for New Regulation
SEC Commissioner Kara M. Stein recently stated that the SEC should increase regulation of ETFs and robo-advisors. Ms. Stein said that “the time may be ripe for reconsidering the whole ETF ecosystem, including possible rulemakings,” especially in light of market events on August 24 which “demonstrate that ETFs may act quite unusually in stressed market conditions and, frankly, break down in ways that we do not completely understand.” She continued, “Now is the time to be asking the hard questions about ETFs. Broadly, we should be considering whether we need new rules to address these innovative funds” including the “roles that all of the individual players in this ecosystem play (such as authorized participants)” and “how ETFs trade, as compared to mutual funds.” Ms. Stein also expressed concern about how robo-advisors satisfy their fiduciary duties: “[W]e should be asking whether these new robo advisors can be neatly placed within our existing laws. Or, do we need certain tweaks and revisions?”
OUR TAKE: Expect the SEC to publish new rules that will significantly impact both ETFs and robo-advisors.