The Securities and Exchange Commission (SEC) will be using current authorities to regulate the use of new artificial intelligence (AI) tools.
“We at the SEC are technology neutral,” Gensler said during the speech. “Just like with the treatment of calculus — we focus on the outcomes, rather than the tool itself. Securities laws, though, may be implicated depending upon how AI technology is used.”
One challenge is the possibility of bias when AI models are used to determine things like who gets jobs, loans, credit, entry to schools and healthcare, Gensler said. The technology’s predictive algorithms may be based on data reflecting historical biases.
Similarly, when used in the services offered by advisers and brokers, AI could put their interests ahead of those of investors — a move that would violate the rules that they must put the best interests of clients and retail customers first, Gensler said.
“That’s why I’ve asked SEC staff to make recommendations for rule proposals for the Commission’s consideration regarding how best to address such potential conflicts across the range of investor interactions,” Gensler said during the speech.
AI has also given fraudsters a new way to personalize communications and deceive members of the public, Gensler said.
The technology could also be used to influence the capital markets, he added. In addition, public companies must be careful not to deceive investors when making statements about the opportunities and risks around AI.
“Make no mistake, though, under securities laws, fraud is fraud,” Gensler said in the speech. “The SEC is focused on identifying and prosecuting any form of fraud that might threaten investors, capital formation or the markets more broadly.”
Gensler’s speech was delivered on the same day that the Consumer Financial Protection Bureau (CFPB) and the European Commission (EC) opened an “informal dialogue” about the digitalization of the financial services sector, including the use of AI to automate decision-making.
“The digitalization of the financial services sector has significant implications for businesses and households, from pricing and customer service to competition and privacy,” Didier Reynders, commissioner for justice and consumer protection of the EC, and Rohit Chopra, director of the CFPB, said Monday.