CBFL Seminar: Democratizing Finance via AI: Investor Protection and Investor Engagement by Professor Konstantinos Sergakis, University of Glasgow

On 13 August 2024, the Centre for Banking and Finance Law (CBFL) welcomed Professor Konstantinos Sergakis, Professor of Capital Markets Law and Corporate Governance, University of Glasgow and Peter Ellinger Visiting Professor, Faculty of Law, National University of Singapore. Associate Professor Sandra Booysen, Director of CBFL, moderated the Professor Sergakis’ lecture titled ‘Democratizing Finance via AI: Investor Protection and Investor Engagement’.

Professor Sergakis began with the claim that the dominant theories of corporate law – founded as they are upon the archetypical image of the rationally passive, selfish and self-centred investor for whom the freedom to invest and to play a part in the governance of a company can only have instrumental (i.e. maximising risk-adjusted return on investment), and not intrinsic value – necessarily deny investor personhood. Premised on empirical research in the United States and the United Kingdom, he observed that the new investment ecosystem is marked by an increasing belief that the act of investment in equity is one of the ways in which investors, especially younger investors, express their personhood, moral values, and agency. Thus, equity investment has intrinsic and not merely instrumental value.

Drawing on interdisciplinary study in the fields of moral and political philosophy and sociology, and with reference to the work of Rawls, Nozick, Hayek, Lomasky, and Arendt, to name a few, he sought to justify a legal and moral framework centred around the investor personhood and the participation of the investor in the act of investing as an individual moral agent and meaningful citizen.

Participants also heard from Associate Professor Andreas Kokkinis of the Birmingham Law School, University of Birmingham, collaborator on the project, as a video recording was played in the Wee Chong Jin Moot Court. Associate Professor Kokkinis shed further light on the imperative of investor engagement from the perspective of moral philosophy, drawing in particular from the Rawlsian veil of ignorance.

Professor Sergakis then returned to address the role of artificial intelligence in shareholder activism. In this respect, he aptly and amply demonstrated the facilitative role technology platforms played in advancing investor personhood by reference to a number of technology products such as Iconik, Tumelo, and Citizens Shareholders. Artificial intelligence, it was suggested, automatically generated voting outputs for users of these platforms based on true user preferences (e.g. moral, ethical and not merely restricted to risk appetite). The implementation of pass-through voting technology enables institutional investors in pooled funds and Exchange-Traded Funds (ETFs) to cast votes in proportion to the Assets Under Management (AUM) they have invested.

By way of proposed legal reforms, Professor Sergakis highlighted, among others, the following priorities: (i) facilitating the exercise of voting rights by retail investors; (ii) having asset owners gauge the preferences of ultimate beneficiaries; and (iii) implementing split voting at both asset manager and asset owner levels. Also addressed were the potential for pass-through voting and for advisory voting coupled with comply-or-explain obligations on the part of fund managers.

The seminar, which was well-attended by academics, legal practitioners, and industry players alike, then ended with a brief but robust Q&A session on the philosophical nature of investing, and an exchange of ideas on how best to effect meaningful change in corporate and investment law and practice.

As Professor Sergakis indicated at the beginning of the seminar, the presentation was not only a continuation of previous work (see: Andreas Kokkinis & Konstantinos Sergakis (18 Jul 2024): Investor personhood: the case against paternalism and welfarism in corporate law, Journal of Corporate Law Studies, DOI: 10.1080/14735970.2024.2373463) but also the beginning of a book project expected to be completed in the next two to three years. While the participants eagerly await its eventual publication, the seminar doubtlessly left them with much to ponder upon in the meantime.

Professor Sergakis’ profile may be found here.

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