Key Takeaways
- Beginning in 2025, the SEC will examine financial businesses’ use of AI tools more closely.
- Ensuring compliance and avoiding false claims on AI capabilities are the main priorities.
- In the face of growing AI deployment, this monitoring seeks to safeguard investors and maintain market integrity.
Beginning next year, the SEC plans to increase its examination of AI technologies used by financial institutions, such as brokers and investment advisers.
Regulators’ growing concerns about the dangers and possible deceptions of AI tools are the reason behind this project.
The SEC’s Division of Examinations said in a report published Monday that it will pay close attention to how companies disclose their use of AI tools in order to guarantee adherence to legal requirements. Examining the oversight of AI applications pertaining to trade, fraud prevention, and anti-money laundering procedures is part of this.
The increased examination comes after the Federal Reserve and the Federal Trade Commission (FTC), among other financial regulators, issued warnings in the past about the possible dangers of AI applications.
“AI washing,” in which businesses overstate or falsify their usage of AI technologies to entice customers or investors, has alarmed the SEC. Two financial advising firms, Delphia and Global Predictions, were punished by the body in March for making fraudulent claims that they used artificial intelligence (AI) in their investment procedures.
The FTC launched “Operation AI Comply” in September to target companies deceiving consumers with AI, taking five law enforcement measures against companies like DoNotPay, Ascend Ecom, and Rytr.
The SEC stated in its most recent report that although financial services are strongly pushing for automation, businesses must strike a balance between innovation, compliance, and transparency.
Given that the worldwide AI trading market is predicted to reach over $50 billion by 2033, up from $18 billion in 2023, the SEC wants to make sure businesses accurately portray AI technologies and reduce any dangers related to them.
