Digital trading platforms use digital nudges—or behavioral prompts—to influence investors, but those nudges have advantages and disadvantages, contends an article in Morningstar. SEC Chair Gary Gensler recently discussed the conundrum at the SEC Speaks Conference, where he mixed his praise of digital platforms for bringing an influx of new investors into the market with caution, specifically about these nudges and whether they should be regulated.

Some types of nudges prompt investors to save, but others push investors into risky trading activities, and regulating them with a broad stroke would prove challenging, Morningstar portends. If, for example, a nudge defaults investors into a savings plan, it could direct that investor into making decisions that will be more beneficial to their retirement account in the long run. But some nudges default investors into margin accounts, which could expose them to more risk, such as if the broker stopped trading from their margin accounts during periods of extreme volatility.

On the other hand, the article points to another type of nudge called “just-in-time disclosures,” which tell investors of all the pertinent risks just before they make an investment decision. This nudge has been found to be very helpful to investors, such as when they’re told of tax consequences from a potential trade. Gensler also specifically called out the conflict-of-interest issues that could arise between trading apps and their nudges, such as when a broker receives payment for data sharing or order flow, and therefore has an interest in nudging for frequent trading.

While behavioral prompts aren’t necessarily a bad thing, investors should be made aware of them and any conflicts-of-interest should be disclosed to them, Morningstar contends, adding that the SEC should carefully separate out which nudges and conflicts need to be regulated rather than making a sweeping change that could negatively affect the bright new crop of investors that have rejuvenated the market.