April 24, 2023
AI: Chair Gensler Weighs In
If regulatory, legal and business risks of AI don’t already pique your interest, know that AI is also on the SEC’s radar. Here’s an excerpt from Chair Gensler’s prepared testimony before the House Committee on Financial Services:
Artificial intelligence and predictive data analytics are transforming so much of our economy. Finance is no exception.
AI already is being used for call centers, account openings, compliance programs, trading algorithms, and sentiment analysis, among others. It’s also fueled a rapid change in the field of robo-advisers and brokerage apps. When the predictive data analytics and algorithms behind these apps are optimizing for investor interests, this can bring benefits in market access, efficiency, and returns.
As commenters to our request for comment on digital engagement practices noted, however, the use of predictive data analytics also can lead to potential conflicts. In particular, conflicts may arise to the extent that advisers or brokers are optimizing for their own interests as well as others.
Thus, I’ve asked staff to make recommendations for the Commission’s consideration for rule proposals regarding how best to address any of these potential conflicts.
I haven’t seen much AI-related disclosure—outside directly-involved tech companies—but I imagine it’s only a matter of time (and not much) before it’s a disclosure hot topic.
– Meredith Ervine