Remarks at the Meeting of the Investor Advisory Committee

Good morning and hearty welcome to the incoming leadership of the Investor Advisory Committee, including Brian Schorr as Chair, Colleen Honigsberg as Secretary, James Andrus as Chair of the Investor as Owner Subcommittee, and Jamila Abston Mayfield as Chair of the Investor as Purchaser Subcommittee. They will join Brian Hellmer, Andrew Park, and Paul Roye, who will continue leading the other subcommittees and working groups.

Thank you to outgoing Chair Christopher Mirabelle and Vice Chair Leslie Van Buskirk for your past leadership of the Committee. Finally, a number of Committee members have either recently completed their terms or will be completing their terms in the coming months. Service on the Committee is voluntary, and I recognize the significant time and effort that each of you contribute to the Committee's work. Thank you for your public service.

Earlier this year, the Commission made an announcement for candidates to fill upcoming vacancies on the Committee. The Commission received a large number of submissions in response to that call. Moving forward, by appointing five new Committee members each year, I hope that the Committee will benefit from increased continuity of members and institutional knowledge.

Today's meeting will explore the provision of investment advice through social media and the deployment of artificial intelligence in the financial services sector. As to the use of social media, I am particularly interested in understanding whether and to what extent the activities of social media influencers is covered by the existing framework applicable to the provision of investment advice. Let us keep in mind, that the First Amendment provides strong protection to free speech, especially with respect to opinions or viewpoints that may be disagreeable. However, the First Amendment does not protect fraudulent market manipulation activities. I look forward to hearing insights as to what reforms - if any - might be appropriate in light of this mode of communication.

The second panel will hopefully focus on how artificial intelligence, through thoughtful regulation, can provide additional value to market participants. Any evolving technology brings with it new risks, but a regulator needs to be forward-thinking and open to ideas other than preserving the status quo. Artificial intelligence could unleash great potential for investors, including through increased and lower-cost access to personalized investment advice. Innovation in this area is something that regulators ought to be encouraging.

Finally, the Committee will be discussing two proposed recommendations, one regarding the protection of self-directed investors when trading complex products and using complex strategies, and the other regarding financial literacy and investor education.

Certain types of complex investment strategies may present more challenges to self-directed investors. One aspect of the recommendation is defining the term "complex product." Without such a definition, the temptation to include a broad set of products - which might not implicate the concerns described in the recommendation - could lead to a paternalistic form of investment screening that deprives self-directed investors of choice. Once there is agreement as to what is meant by "complex products," any regulatory response should be narrowly tailored to protect investors without unduly limiting investment opportunity. Many investors seek financial advice through a trusted intermediary, such as a broker or an investment adviser. However, individual investors should not be denied the opportunity to deploy their own self-directed strategies merely based on their status as individuals. I look forward to the Committee's recommendations in this regard.

As to the recommendation regarding investor education, the Commission, along with its partners at state securities regulators and FINRA, have undertaken efforts over the decades to help empower investors to navigate the securities markets. However, many investors report that they prefer to hire a financial professional to handle these tasks for them. This approach is no different than a person hiring an electrician instead of rewiring a house on their own. Therefore, the Committee might want to consider whether any recommended educational efforts should include tools for assessing and selecting financial professionals. While financial literacy is important, given the significant use of financial professionals to manage assets, these types of tools are also a necessary part of the mix of information that should be provided to investors.

Thank you to the Committee members and panelists for your time in preparing for this meeting. I look forward to the discussions to follow.