SEC Withdrawal of Predictive Data Analytics Conflicts Rule
In June 2025, the U.S. Securities and Exchange Commission (SEC) formally withdrew proposed rules aimed at regulating conflicts of interest arising from the use of predictive data analytics by broker-dealers and investment advisers. The withdrawal followed a series of notices of proposed rulemaking issued between March 2022 and November 2023, none of which advanced to finalization. The SEC explicitly stated that it does not intend to issue final rules on these proposals at this time, though it reserved the right to revisit the issue through future regulatory actions if deemed necessary.
The proposed rules targeted conflicts of interest that could emerge when firms use predictive data analytics to influence investor interactions, recommendations, or transactions. The SEC’s decision to withdraw these rules reflects a shift in regulatory approach, opting instead to rely on existing frameworks to oversee AI-driven practices in the industry.
The SEC’s withdrawal applies to multiple notices published in the Federal Register between 2020 and 2023. These included proposals such as those from July 27, 2022 (87 FR 45052), August 9, 2023 (88 FR 53960), and March 9, 2023 (88 FR 14672), among others. By withdrawing these proposals, the SEC effectively closed the chapter on direct rulemaking in this area for the time being.
Regulatory Approach Post-Withdrawal: Enforcement Through Existing Rules
With the withdrawal of the predictive data analytics conflicts rule, the SEC has signaled its intent to enforce compliance with AI-related risks through existing regulatory frameworks. This approach aligns with the agency’s broader strategy of adapting current rules—such as those governing fair dealing, suitability, and anti-fraud provisions—to address emerging technologies. The SEC has made clear that firms misrepresenting their use of AI or failing to disclose material risks associated with algorithmic decision-making may face enforcement actions under existing authorities.
For instance, the SEC has previously taken action against firms that overstated their use of AI in marketing or client communications. Such enforcement actions underscore the agency’s willingness to hold firms accountable for misleading claims, even in the absence of dedicated AI-specific regulations. The withdrawal does not diminish the SEC’s oversight of predictive data analytics; rather, it consolidates scrutiny under established rules, ensuring that conflicts of interest—whether driven by AI or traditional methods—remain subject to regulatory scrutiny.
Implications for Broker-Dealers and Investment Advisers
The withdrawal of the proposed rules does not eliminate the SEC’s expectations for firms using predictive data analytics.
Additionally, the SEC’s emphasis on enforcement under existing rules serves as a reminder that firms cannot operate in a regulatory gray area simply because no dedicated AI rules exist. Misleading investors about the capabilities or limitations of AI-driven tools—or failing to disclose material risks—could trigger investigations and penalties. The agency’s track record of pursuing cases involving false or exaggerated claims about AI underscores the importance of accuracy and transparency in all client communications.
For firms developing or deploying predictive data analytics, the withdrawal of the proposed rules presents both challenges and opportunities. On one hand, the absence of specific guidance may create uncertainty about how to interpret existing obligations in the context of AI. On the other hand, it provides an opportunity for firms to proactively align their practices with broader regulatory expectations, such as those related to suitability, best execution, and conflict-of-interest disclosures.
Required actions
- Would have required firms to identify and eliminate or neutralise conflicts of interest arising from AI-driven investor interactions