The Securities and Exchange Commission (SEC) said on Friday that it was stepping up its research into "gamification" and behavioral prompts in online brokerage trading software, which are used by online brokerages and investment advisers to stimulate retail investors to trade more stocks and other securities.
SEC said new financial technologies could mislead investors by making optimistic forecasts of profits without disclosing appropriate risks or underestimating the risks of a particular investment.
Gary Gensler, chairman of SEC, said: "while the new technology can bring us more opportunities and product choices, it also raises the question of whether we, as investors, are properly protected when trading and obtaining financial advice. In many cases, these functions may encourage investors to trade more frequently, invest in different products, or change their investment strategies. "
Robinhood, an online brokerage of online celebrities in the United States, is currently under SEC investigation because of its customer trading prompts.
SEC says online investment firms and brokerages often use "predictive" analysis tools designed to show clients their returns under the best (but not necessarily possible) outcomes.
While brokers may disclose that their forecasting models do not guarantee future returns, Mr Gensler said he wanted to collect investor tips on game-like features on financial platforms, behavioural tips on more frequent trading and "other online elements or functions designed to interact with retail investors on online platforms".
SEC often consults the public before drafting new rules and regulations on Wall Street.