April 3, 2024

Corp Fin Workshop Addresses AI Disclosures

With respect to AI disclosures, the Staff participating in the Corp Fin Workshop at “The SEC Speaks in 2024” said that 59% of annual reports filed by large accelerated filers made some mention of AI this year, up from 27% the prior year. Discussions were included in risk factors, the business section or MD&A, and 33% of filings included disclosures in both the business and risk factors sections. The Staff also identified the financial statements, disclosure controls and procedures and the board’s role in risk oversight as other areas where AI-related disclosures may be required under existing rules.

In considering what to address in AI disclosures, the Staff highlighted the following considerations:

– Whether use of AI exposes the company to additional operational or regulatory risks, including risks related to data privacy, discriminatory results or bias, IP, consumer protection, regulatory compliance and macroeconomic conditions

– Whether the company’s disclosure on its use and development of AI and material AI risks are tailored to its facts and circumstances

– Whether the company has support for its claims when disclosing AI opportunities

– Whether disclosure of the board’s role in AI oversight is warranted

– Whether investors would benefit from disclosure of the company’s use of any AI risk management framework—like NIST or any industry specific guidance (similar to cybersecurity disclosures)

– Whether the company faces risks related to the EU AI Act and whether current general disclosure, if any, should be more tailored to address how a company will be impacted based on its particular facts and circumstances

– Meredith Ervine