{"id":10118,"date":"2023-06-29T13:06:31","date_gmt":"2023-06-29T13:06:31","guid":{"rendered":"https:\/\/iqeq.com\/?p=10118"},"modified":"2023-08-24T10:33:01","modified_gmt":"2023-08-24T10:33:01","slug":"sec-to-explore-rules-governing-brokers-use-of-ai","status":"publish","type":"post","link":"https:\/\/iqeq.com\/insights\/sec-to-explore-rules-governing-brokers-use-of-ai\/","title":{"rendered":"SEC to explore rules governing brokers\u2019 use of AI"},"content":{"rendered":"
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On June 13, 2023, the U.S. Securities and Exchange Commission (SEC) acknowledged that it was considering new rules governing the use of artificial intelligence (AI) by brokers interacting with clients.<\/strong><\/p>\n

The SEC’s stance on the use of AI<\/h2>\n

The SEC\u2019s Office of Information and Regulatory Affairs released the Spring 2023 Unified Agenda of Regulatory and Deregulatory Actions \u2013 a semiannual publishing of short- and long-term regulatory actions that various federal agencies are developing. In that agenda is a proposed rule<\/a> prohibiting \u201cconflicted practices\u201d for broker-dealers using certain technologies. Per the SEC:<\/p>\n

\u201cThe Division is considering recommending that the Commission propose rules related to broker-dealer conflicts in the use of predictive data analytics, artificial intelligence, machine learning and similar technologies in connection with certain investor interactions.\u201d<\/em><\/p>\n

\u201cTechnology, markets and business models constantly change,\u201d SEC Chair Gary Gensler said in a prepared statement following the agenda\u2019s release. \u201cThus, the nature of the SEC\u2019s work must evolve as the markets we oversee evolve.\u201d<\/p>\n

The SEC also said it is considering proposed amendments<\/a> to the rule exempting some internet advisors (robo-advisors) from registering as money managers.<\/p>\n

Gensler has previously shown skepticism and urged caution about the potential for AI platforms to cause \u201cfragility\u201d in the U.S. financial system. During a May 2023 conference hosted by the Financial Industry Regulatory Authority (FINRA), per a Wall Street Journal<\/em> report<\/a>, the SEC chair said that future observers might look back and say \u201cthe crisis in 2027 was because everything was relying on one base level, what\u2019s called [the] generative AI level, and a bunch of fintech apps are built on top of it.\u201d<\/p>\n

Wider restrictions around generative AI technology<\/h2>\n

The SEC isn\u2019t the only financial agency eyeballing restrictions on the use of AI. Bloomberg reported that after the release, Consumer Financial Protection Bureau Director Rohit Chopra said \u201cthat if left unchecked \u2026 AI could usher in more fraud and discrimination in finance.\u201d<\/p>\n

In prepared remarks made in April, Chopra discussed an interagency statement calling out other AI issues, such as the potential for discrimination.<\/p>\n

\u201cGenerative AI, which can produce voices, images and videos that are designed to simulate real-life human interactions are raising the question of whether we are ready to deal with the wide range of potential harms \u2013 from consumer fraud to privacy to fair competition. Today, several federal agencies are coming together to make one clear point: there is no exemption in our nation\u2019s civil rights laws for new technologies that engage in unlawful discrimination. Companies must take responsibility for their use of these tools.\u201d<\/em><\/p>\n

Financial threats outlined at the time included discrimination in algorithmic appraisals, \u201cAI advertising\u201d and black-box credit models.<\/p>\n

Our expert regulatory compliance team keeps a close eye on upcoming developments, such as this move to regulate AI, through our robust horizon scanning capabilities. <\/strong>Find out more about our U.S. compliance consulting services<\/strong><\/a>.<\/strong><\/h4>\n <\/div>\n<\/section>\n\n
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Meet the author<\/h2>\n
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\n \"\" <\/div>\n
\n \"\" <\/div>\n
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Sean Wilke<\/h3>\n

Senior Managing Director, Head of Growth Strategy<\/p>\n

<\/div>\n

United States<\/p>\n \n Send email <\/a>\n \n +1 646 453 4298 <\/a>\n

\n \n LinkedIn<\/span>\n <\/a>\n <\/div>\n <\/div>\n<\/div> <\/div>\n
\n <\/div>\n <\/div>\n<\/section>","protected":false},"excerpt":{"rendered":"","protected":false},"author":5,"featured_media":10119,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":""},"categories":[1],"tags":[431],"expertise":[444,17],"service_category":[],"acf":[],"yoast_head":"\nSEC to explore rules governing brokers\u2019 use of AI - IQ-EQ<\/title>\n<meta name=\"description\" content=\"On June 13, 2023, the U.S. Securities and Exchange Commission (SEC) acknowledged that it was considering new rules governing the use of artificial intelligence (AI) by brokers interacting with clients.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/iqeq.com\/insights\/sec-to-explore-rules-governing-brokers-use-of-ai\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"SEC to explore rules governing brokers\u2019 use of AI - 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