Tag Archives: Jeff robins

AI Enforcement Starts with Washing: The SEC Charges its First AI Fraud Cases

by Andrew J. Ceresney, Charu A. Chandrasekhar, Avi Gesser, Arian M. June, Robert B. Kaplan, Julie M. Riewe, Jeff Robins, and Kristin A. Snyder

Photos of authors

Top (left to right): Andrew J. Ceresney, Charu A. Chandrasekhar, Avi Gesser, and Arian M. June
Bottom (left to right): Robert B. Kaplan, Julie M. Riewe, Jeff Robins, and Kristin A. Snyder (photos courtesy of Debevoise & Plimpton LLP)

On March 18, 2024, the U.S. Securities and Exchange Commission (“SEC”) announced settled charges against two investment advisers, Delphia (USA) Inc. (“Delphia”) and Global Predictions Inc. (“Global Predictions”) for making false and misleading statements about their alleged use of artificial intelligence (“AI”) in connection with providing investment advice. These settlements are the SEC’s first-ever cases charging violations of the antifraud provisions of the federal securities laws in connection with AI disclosures, and also include the first settled charges involving AI in connection with the Marketing and Compliance Rules under the Investment Advisers Act of 1940 (“Advisers Act”). The matters reflect Chair Gensler’s determination to target “AI washing”—securities fraud in connection with AI disclosures under existing provisions of the federal securities laws—and underscore that public companies, investment advisers and broker-dealers will face rapidly increasing scrutiny from the SEC in connection with their AI disclosures, policies and procedures. We have previously discussed Chair Gensler’s scrutiny of AI washing and AI disclosure risk in Form ADV Part 2A filings. In this client alert, we discuss the charges and AI disclosure and compliance takeaways.

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SEC Proposes Rule to Eliminate or Neutralize Conflicts in the Use of “Predictive Data Analytics” Technologies

by Andrew J. Ceresney, Charu A. Chandrasekhar, Avi Gesser, Jeff Robins, Matt Kelly, Gary E. Murphy, Jarrett Lewis, Robert B. Kaplan, Marc Ponchione, Sheena Paul, Catherine Morrison, Julie M. Riewe, Kristin A. Snyder, and Mengyi Xu

Photos of the authors

Top left to right: Andrew J. Ceresney, Charu A. Chandrasekhar, Avi Gesser, Jeff Robins, Matt Kelly, Gary E. Murphy, and Jarrett Lewis.
Bottom left to right: Robert B. Kaplan, Marc Ponchione, Sheena Paul, Catherine Morrison, Julie M. Riewe, Kristin A. Snyder, and Mengyi Xu.
(Photos courtesy of Debevoise & Plimpton LLP)

On July 26, 2023, the U.S. Securities and Exchange Commission (“SEC”) issued proposed rules (the “Proposed Rules”) that would require broker-dealers and investment advisers (collectively, “firms”) to evaluate their use of predictive data analytics (“PDA”) and other covered technologies in connection with investor interactions and to eliminate or neutralize certain conflicts of interest associated with such use. The Proposed Rules also contain amendments to rules under the Securities Exchange Act of 1934[1] (“Exchange Act”) and the Investment Advisers Act of 1940[2] (“Advisers Act”) that would require firms to have policies and procedures to achieve compliance with the rules and to make and maintain related records.

In this memorandum, we first discuss the scope of the Proposed Rules and provide a summary of key provisions. We also discuss some key implications regarding the scope and application of the rules if adopted as proposed. The full text of the proposal is available here.

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A Late Winter Blizzard of SEC Cybersecurity Rulemaking: the Proposed BD Cybersecurity Rules and Expanded Reg S-P and Reg SCI Obligations

by Luke Dembosky, Avi Gesser, Erez Liebermann, Marc Ponchione, Julie M. Riewe, Jeff Robins, Kristin Snyder, Charu A. Chandrasekhar, Sheena Paul, Suchita Brundage, Michael R. Roberts, Mengyi Xu, and Ned Terrace

Photos of the authors

Top row from left to right: Luke Dembosky, Avi Gesser, Erez Liebermann, Marc Ponchione, Julie M. Riewe, and Jeff Robins.
Bottom row from left to right: Kristin Snyder, Charu A. Chandrasekhar, Sheena Paul, Suchita Brundage, Michael R. Roberts, and Mengyi Xu.
(Photos courtesy of Debevoise & Plimpton LLP)

On March 15, 2023, the U.S. Securities and Exchange Commission (the “SEC”) released a suite of proposed new rules (the “Proposed Rules”) that include:

  • Proposed new cybersecurity rules for broker-dealers, security-based swap dealers, major security-based swap participants, transfer agents, a variety of market infrastructure providers (national securities exchanges, clearing agencies, and security-based swap data repositories), and securities SROs (collectively, “Market Entities”) that would impose new policies and procedures requirements and incident notification obligations (“BD Cyber Proposal”);
  • Amendments to Regulation S-P (“Reg S-P”) that would require the implementation of an incident response program, including a new customer notification obligation; expand the scope of the existing requirements relating to the safeguarding of “customer” information and the disposal of “consumer” information relating to individuals (the “Safeguards and Disposal Rules”); and impose new recordkeeping requirements (“Reg S-P Proposal”); and
  • Amendments to Regulation SCI (“Reg SCI”) to expand the scope of covered entities to cover certain broker-dealers without an ATS and security-based swap data repositories and to update requirements relating to policies and procedures, incident notification, and other compliance obligations (“Reg SCI Proposal”).

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Likely Policy Priorities of the Gensler SEC

by Kara Brockmeyer, Andrew Ceresney, Arian June, Robert Kaplan, Julie Riewe, Jeff Robins, Jonathan Tuttle, Charu Chandrasekar, and Amy Aixi Zhang

Gary Gensler was confirmed on April 14 in a 53-45 vote as Chair of the Securities and Exchange Commission (“SEC”).

Before his confirmation, Chair Gensler testified before the Senate Committee on Banking, Housing and Urban Affairs (“Banking Committee”) on Tuesday, March 2, 2021. Several key themes emerged in Chair Gensler’s testimony that signaled some of his likely policy priorities and directions for future initiatives at the agency.

Chair Gensler’s opening statement[1] and responses to questions provided perspective on three major policy themes: (1) the SEC’s potential role in using its disclosure, examination and enforcement authority to advance environmental, social and governance (“ESG”) and political spending priorities of the Democratic Party and Biden Administration; (2) market structure reforms, particularly in the equity markets in the wake of the WallStreetBets-related market volatility (though market structure reform more broadly will be a priority); and (3) digital asset and financial technology, and in particular, the regulation of cryptocurrency and new technologies.

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SEC Enforcement Highlights the Risks of Not Preserving Text/Chat Messages—Practical Tips for Aligning Policies with Practices to Reduce Risk

by Avi Gesser, Jeff Robins, Chana Zuckier, and Julie M. Riewe

At many companies, employees are increasingly using non-business communication applications (“apps”) such as iMessage, WhatsApp and WeChat for business-related communications. This trend has likely accelerated in the COVID era, as work-from-home arrangements blur traditional lines between “business” and “personal” time and many conversations that were normally held in person are now done virtually. A recent SEC enforcement action highlights the risk that these communications pose for companies subject to strict record retention requirements, such as broker-dealers pursuant to Rule 17a-4 under the Securities Exchange Act, as well as FINRA Rule 3110 and related guidance, as well as and investment advisers subject to Rule 204-2 and related guidance under the Investment Advisers Act of 1940. But it also highlights the risks that these communications pose more broadly for companies, and the need to consider adopting technologies and policies that reduce these risks.

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