The SEC's regulatory interest in AI extends beyond rule proposals and speeches, with the agency potentially using information gathered in its AI sweep for guidance on the use of AI by investment advisers or broker-dealers, or for enforcement actions. The SEC's focus on AI underscores the need for advisers and broker-dealers to examine their use of AI tools and ensure their policies address key areas of SEC concern. This includes conflicts of interest, which are likely to remain a central focus due to the proposed PDA Conflicts Rules.
Key takeaways:
- The U.S. Securities & Exchange Commission (SEC) is increasing its focus on regulating the use of artificial intelligence (AI) by financial services providers, with proposed rules for conflicts of interest in the use of AI and predictive data analytics.
- SEC Chairman Gary Gensler has highlighted specific risks associated with AI, including data privacy, financial stability, deception, AI bias, and potential for conflicts of interest.
- The SEC is currently conducting sweep examinations of private fund advisers using AI, with questions covering a wide range of topics beyond conflict-of-interest issues.
- The SEC's focus on AI regulation has accelerated this year, suggesting a broader regulatory agenda and an increased likelihood of future regulation and SEC enforcement actions.