SEC's Atkins Holds Line on Materiality; Peirce Warns on AI Rules in Likely Last IAC Meeting

SEC Chair Paul Atkins told the Investor Advisory Committee that AI's ability to digest filings gives the Commission no latitude to depart from materiality when it prescribes disclosure requirements, while Commissioner Hester Peirce cautioned against regulating the technology prematurely, adding that the meeting likely will be her last with the committee.

Mr. Atkins addressed the committee's September 10, 2026, meeting in pre-recorded remarks, saying business out of town kept him from attending. Both officials sought feedback on the Commission's June 2026 proposal to rescind the trade-through rule (see prior coverage).

Mr. Atkins said (i) AI may ease the burden of digesting SEC filings but does not lower issuers' cost of preparing disclosures, (ii) AI at least currently cannot always discern fact from fiction, much less materiality from immateriality, and its susceptibility to errors and hallucinations remains a significant concern for disclosures investors rely on, and (iii) opaque models obscure accountability, and widespread reliance on similar tools can let errors cascade across the marketplace. He added that the SEC, as a non-merit regulator, will not dictate which AI models firms use.

Ms. Peirce, who announced in June 2026 that she will leave the SEC in November (see prior coverage), warned that fear-driven regulation could erect barriers to entry and push innovators offshore. She asked the committee to weigh whether AI improves disclosure quality or reduces it to boilerplate and whether AI tools are widening the cost gap between large and small firms.

On equity market structure, Mr. Atkins reaffirmed the proposal to rescind Regulation NMS Rule 611 ("Order protection rule") and the locked-and-crossed-markets prohibitions in Rule 610 ("Access to quotations"), calling the trade-through rule a misstep that fragmented liquidity and made execution costlier, more complex, and less transparent.

Ms. Peirce asked how the SEC can ensure that the post-amendment National Best Bid and Offer remains a reliable benchmark, noting that commenters have raised concerns rescission would reduce its integrity. She also asked how the proposed amendments would affect retail and institutional investors differently.