ARE ROBOTS GOOD FIDUCIARIES? REGULATING ROBO-ADVISORS UNDER THE INVESTMENT ADVISERS ACT OF 1940

In the past decade, robo-advisors online platforms providing investment advice driven by algorithms have emerged as a low-cost alternative to traditional, human investment advisers. This presents a regulatory wrinkle for the Investment Advisers Act, the primary federal statute governing investment advice. Enacted in 1940, the Advisers Act was devised with human behavior in mind. Regulators now must determine how an automated alternative fits into the Act's framework. A popular narrative, driven by investment advice professionals and the popular press, argues that robo-advisors are inherently structurally incapable of exercising enough care to meet Advisers Act standards. This Note draws upon common law principles and interpretations of the Advisers Act to argue against this narrative. It then finds that regulators should instead focus on robo-advisor duty of loyalty issues because algorithms can be programmed to reflect a firm's existing conflicts of interest. The Note concludes by arguing for a shift in regulatory focus and proposing a two-part heightened disclosure rule that would make robo-advisor conflicts of interest more transparent.