Practice question, Automated tools and emerging technology
Show how statements about your automated investment tools, models or algorithms are checked against how those tools actually operate and against what clients were told.
Taft practice question: not an official regulator question. SEC Division of Examinations, United States (federal). For SEC-registered investment advisers. Evidence category: Marketing materials.
Not legal advice. A practice prompt for rehearsing how your team explains its controls and evidence. No scoring, no model answer, no implication that a regulator will ask these words.
Authored by Taft. Last checked 2026-11-09. All questions.
Why it is relevant
The 2027 priorities say reviews of automated advisory services and related tools will generally include whether representations are fair and accurate, whether operations and controls are consistent with disclosures, and whether algorithms lead to advice consistent with investors' profiles or stated strategies.
Sources: [1] Section VII.A.2
Evidence to locate
Suggested, not mandatory. A regulator's actual request list governs.
No evidence cues listed.
Follow-up prompts
Who can change a model, and how is a change tested and recorded?
Applicability
- Applies to
- Advisers that use automated investment tools, trading algorithms or alternative data.
- Does not apply to
- Not stated.
Cite
Cite the official source first. Then: Taft Compliance Group, Exam-prep toolkit (draft), question q-automated-advice-representations, https://taftcompliance.com/resources/exam-prep-toolkit/questions/q-automated-advice-representations, last checked 2026-11-09.
Sources
U.S. Securities and Exchange Commission, Division of Examinations, Fiscal Year 2027 Examination Priorities (staff statement). regulator guidance. Section VII.A.2, Emerging Financial Technology, page 12.
https://www.sec.gov/files/2027-exam-priorities.pdf
Checked 2026-11-09.
Supporting passage
The Division remains focused on registrants' use of certain products and services, such as automated investment tools and trading algorithms or platforms, and the risks associated with the use of emerging technologies and alternative data sources. The Division will prioritize firms that engage in activities such as automated investment advisory services, recommendations, and related tools and methods. When conducting these reviews, assessments generally will include whether: (1) representations are fair and accurate; (2) operations and controls are consistent with disclosures made to investors; and (3) algorithms lead to advice or recommendations consistent with investors' investment profiles or stated strategies.
Changes to this question
No released changes.