WASHINGTON – The American Consumer & Investor Institute today released a new analysis examining the impact the U.S. Securities and Exchange Commission’s (SEC) proposed predictive data analytics (PDA) rule will have on Main Street investors, defined as investors in the bottom half of the income distribution.
The study, authored by Joseph H. Haslag, Ph.D., Kenneth Lay Chair in Economics at the University of Missouri, found that, “When evaluated at the median level of stock holdings, each Main Street household foregoes $785 if the rule is implemented. After aggregating, the added Main Street households are foregoing $1.485 billion in stock returns.”
As written, the proposed PDA rule would impose new compliance requirements on nearly every technology investment advisors and broker-dealers use to interact with customers, likely making it too costly and burdensome for firms to continue providing these tools. Retail investors will be particularly hard hit, losing access to educational resources and information that have allowed more Americans to invest in the stock market than ever before.
As Dr. Haslag further notes, “Overall, Main Street investors have quantifiable losses that are associated with the SEC’s rule to limit predictive data analytics. A basic economic principle holds: consumers lose when government regulation stifles technological progress, which curtails new product development.”
In an appendix to the study, Dr. Lisa L. Cole Martin, Ph.D., Adjunct Instructor at North Carolina A&T State University, addressed the impact the proposed PDA rule will have on minority and low- and middle-income investors.
“Predictive data analysis, a cornerstone of data science, has emerged as a powerful tool for empowering minority and low- to middle-class investors, providing valuable insights into future market trends,” Dr. Martin wrote. “By utilizing advanced statistical models and algorithms to analyze historical data, predictive data analytics aids individuals in making informed investment decisions, mitigating risks, and maximizing returns. This approach is pivotal in empowering marginalized communities in the intricate world of investments and fostering economic inclusivity.”
“Advances in technology have expanded access to the stock market and all of the opportunities it provides for retail investors,” said Barbara Comstock, Executive Director of the American Consumer & Investor Institute. “This report sheds light on the harmful impact consumers will face, particularly minority and low and middle-income investors, if the SEC’s predictive data analytics rule is finalized as written. It is a prime example of another misguided, overreaching SEC policy that will crush innovation and create barriers to financial access. SEC Chairman Gary Gensler should listen to the bipartisan pushback this proposal has received and change course.”
Read the full study and appendix here.
