On December 2, 2025, during a speech at the American Bar Association, Brian Daly, the Director of the Securities and Exchange Commission (SEC) Division of Investment Management, outlined a forward-looking agenda focused on innovation. His priorities include deregulation, modernization, democratization, and the integration of artificial intelligence (AI) into the investment management landscape. Daly emphasized that while the SEC Commissioners will guide the overall strategy, his personal focus will be on listening to industry stakeholders and adapting to their needs.
Daly positioned AI as a transformative element in the investment management sector, stating that it could reshape the way disclosures are made and improve the overall investor experience. He noted that AI has the potential to convert traditional, text-heavy fund offering materials into interactive, personalized tools that better meet the information consumption habits of modern investors.
Addressing Regulatory Challenges of AI
During his remarks, Daly urged industry players to collaborate with the SEC in navigating the regulatory questions surrounding AI. Key concerns include whether the output from AI systems qualifies as marketing material or investment advice, the conditions under which an AI system should be registered, and how to allocate liability for inaccuracies in advice generated by these systems. He expressed a strong desire to engage with industry leaders on these complex issues, encouraging an open dialogue to address the evolving landscape.
Daly highlighted the need for thoughtful deregulation as a pathway to foster innovation. He referenced recent SEC actions, such as streamlining the approval process for exchange-traded funds (ETFs), which have significantly contributed to the growth of this investment vehicle. He advocated for a “lighter-touch regime” that would enable private funds to flourish by affording sophisticated investors greater flexibility in managing their own risks.
Modernizing Regulations and Expanding Access
Another focal point of Daly’s agenda involves the modernization of outdated rules that fail to reflect current industry realities. He specifically called attention to the Custody Rule, which does not account for digital assets. He pointed to a recent no-action letter addressing the custody of cryptoassets as a sign of progress. Daly also indicated a willingness to reevaluate the books and records rule for investment advisers, aiming for updates that are “platform-independent, technology-neutral, and future-ready.”
The democratization of private markets emerged as a critical priority during his address. Daly reiterated his commitment to enhancing retail investors’ access to alternative investments, although he tempered expectations regarding immediate changes. He pledged to implement thoughtful, incremental adjustments to existing regulations, highlighting a recent move to rescind limitations on closed-end funds’ exposure to private funds. Rather than imposing new rules, the Division opted to issue guidance to assist stakeholders in adapting to this shift.
Daly concluded his remarks by underscoring the SEC’s role as the “Investor’s Advocate.” He reaffirmed the commitment to retail protection and market stability while encouraging innovation through constructive engagement with the investment community.
In summary, Daly’s address signals a pivotal moment for the SEC’s Division of Investment Management, with a clear focus on integrating AI into its strategy and fostering an environment conducive to innovation. As advisers look to explore new AI applications, from client-facing tools to compliance systems, they are encouraged to assess how existing regulatory frameworks may apply. “If you want to innovate,” Daly stated, “this is the Commission that you have been waiting for.”
