Robo Feds: SEC Will Use AI for ‘Market Surveillance’ and Regulatory Oversight

In this Friday, Oct. 21, 2016 photo, the Ares, a humanoid bipedal robot designed by Chines
AP Photo/Ng Han Guan

The Securities and Exchange Commission (SEC) is embracing AI technologies to enhance “market surveillance” and assist in enforcement investigations.

The Wall Street Journal reports that in a recent Senate hearing, SEC Chair Gary Gensler revealed that the agency is actively using AI to monitor financial markets and aid in various enforcement investigations. This marks a significant step in the SEC’s approach to regulating the ever-evolving landscape of financial markets.

Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC) Photographer: Al Drago/Bloomberg

“We already do in some market surveillance … to look for patterns in the markets,” Gensler told Senate lawmakers, emphasizing the agency’s proactive stance in utilizing advanced technologies for regulatory purposes.

While the SEC has often highlighted its data-driven methods for identifying manipulative or fraudulent trades, this is one of the first instances where the agency has openly discussed its own use of AI. The technology is not just a tool for hedge funds and investors anymore; it’s becoming a vital part of the regulatory framework.

The SEC is also scrutinizing the ethical dimensions of AI, particularly when it comes to conflicts of interest. Brokerages and investment advisers often use AI models to interact with clients or make decisions on their behalf. Gensler mentioned that the SEC had proposed a rule in July aimed at requiring firms to disclose, mitigate, or eliminate any conflicts of interest embedded in these AI models. The proposal has sparked debate among lawmakers, with some suggesting that the rule may be too broad in its scope.

Moreover, Gensler hinted at the possibility of new legislation to address the challenges and risks posed by AI technologies. “We have good laws, but these new technologies will challenge those laws,” he said, acknowledging the need for legal frameworks that can adapt to technological advancements.

Read more at the Wall Street Journal here.

Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship. Follow him on Twitter @LucasNolan


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