Regulating Robo-Advisory

40 Pages Posted: 6 Nov 2019 Last revised: 24 Jan 2020

See all articles by Philipp Maume

Philipp Maume

TUM School of Management; European Corporate Governance Institute (ECGI)

Date Written: April 20, 2018

Abstract

Robo-advisors are internet-based advisory services that use algorithms to create investment recommendations with no human input, and they are growing in popularity. They deliver financial advice at a fraction of the cost of traditional financial advisors. However, the nature of the interaction between client and machine raises many legal questions and concerns. It is unclear how regulators should approach the phenomenon. Regulators in major jurisdictions have taken different approaches.

This article argues that robo-advisory is essentially different from traditional financial advice. Nevertheless, it demonstrates that current regulation, in particular the European Union framework for financial intermediaries, is able to address most of the resulting issues. The core conclusion is that, in applying the existing rules to robo-advisors, the rules should not be interpreted to create a level playing field for all market participants.

Keywords: Securities Regulation; Robo-Advisor; Robo-Advice; Fintech

JEL Classification: G23; G24; K22

Suggested Citation

Maume, Philipp, Regulating Robo-Advisory (April 20, 2018). Texas International Law Journal, Volume 55, Issue 1 (Fall 2019), pp. 49-87. Available at SSRN: https://ssrn.com/abstract=3167137 or http://dx.doi.org/10.2139/ssrn.3167137

Philipp Maume (Contact Author)

TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany

HOME PAGE: http://www.law.wi.tum.de

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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