SEC probes AI use by investment advisors

The news: The US Securities and Exchange Commission (SEC) has sent requests for information to investment advisors, to understand how they use and oversee artificial intelligence, reported the Wall Street Journal.

The context: The agency sent a sweep of requests for information to several investment advisors, covering 26 broad topics referred to as agency concerns, requesting that firms provide the SEC with documents relating to the management of potential conflicts of interest related to AI. It also asks for contingency plans for outages or system failure, and any of the firm’s reports on AI systems creating regulatory or legal issues.

The SEC did not confirm or deny the sweep and has not publicised any documents related to the requests.

Large institutions are increasingly exploring and adopting tools powered by AI in efforts to streamline and improve everything from back end operations to investment decisions to client interaction and management. Agency head Gary Gensler has been outwardly apprehensive about the technology and how it should be regulated if used in a financial context.