Oct. 22, 2023
Dear Members of the Securities and Exchange Commission, I am writing to express serious concerns regarding the proposed PDA proposal, which, as drafted, poses significant challenges and unintended consequences for the retail and institutional investment advisory industry. I hereby request the Commission to reconsider the provisions of this proposal in light of the following critical issues, including: 1. Overly Broad Scope: requiring the elimination rather than disclosure of conflicts arising from predictive analytics, could extend to rudimentary technologies like Excel spreadsheets. This broad scope could inadvertently encompass a wide range of established technological tools essential to the daily operations of advisors and broker-dealers. 2. Adverse Impact on Technology Usage: as drafted, the rule imposes operationally unfeasible requirements that could deter firms from deploying technological innovations and would almost certainly stifle sector growth and curb innovation. The prohibitive cost of compliance could act as a de facto ban on technology, stymieing market competition and ultimately, harming the investors the Commission seeks to protect. 3. Legal Challenge to SEC's Authority: there should be a thorough legal review to ensure the proposed rule aligns with the SEC's statutory authority under existing laws. 4. Disruption to Existing Regulatory Framework: the proposal could upend the existing regulatory framework, particularly Regulation Best Interest (Reg BI), by reshaping its requirements and potentially limiting investors’ access to certain products, thus undermining the objectives of previous regulatory efforts. 5. Lack of Clarity and Reasoning: the lack of discernible boundaries defining what constitutes 'covered technology' creates ambiguity, and the omission of mitigating conflicts through disclosure and informed consent, may result in regulatory overreach. 6. Stifling Technological Innovation: the proposal’s resistance to technological innovation could inhibit regulated institutions from enhancing their systems, finding efficiencies for their customers, and staying competitive in a rapidly evolving market landscape. 7. Unanticipated Expansion of Conflict Handling: the proposal represents a significant expansion in how conflicts are handled, necessitating a more cautious approach to ensure that the rule achieves its intended objectives without overburdening the industry and inadvertently impacting consumers. The cumulative effect of these issues could significantly impact the industry’s ability to serve investors effectively and continue to innovate. I urge the Commission to reconsider the proposed rule, engage in a more extensive dialogue with industry stakeholders, and conduct a thorough review to address these critical concerns. Thank you for your attention to these serious matters. I am hopeful that a collaborative approach can lead to a more balanced and effective rule that serves the interests of both the industry and investors alike. Sincerely, Joseph Brocato