"WE ARE THE INVESTOR'S ADVOCATE," and we want to know how you use AI.
That's the tagline from the Security and Exchange Commission's home page (www.sec.gov). The SEC has broad roles and powers categorized as 1. Investor Protection 2. Fair, Orderly, and Efficient Markets, and 3. Capital Formation (raising funds).
The President appoints five Commissioners with the advice and consent of the Senate.
For the Under the Investor Production section, the SEC has sent out sweeps letter to select RIA (Registered Investment Advisors). Sweeps letters are requests for information. The requests concern how select RIAs use AI for business and investor advice.
The SEC released a 239-page proposal ("Conflicts of Interest Associated with the Use of Predictive Data Analytics by BrokerDealers and Investment Advisers") in July 2023. The SEC's primary concern is that RIAs cannot reasonably keep up or know that AI models provide unbiased advice.
"While the risk of poor data quality or skewed data is not unique to AI, the ability of PDA-like technologies (read: AI) used in investor interactions to process data more quickly than humans, and the potential for technology to disseminate the resulting communications to a mass market, can[…]."
My $.02 is that the SEC should work with the tech industry to develop standards and processes. Going to individual RIAs is addressing symptoms and not root cause.
Chair Gensler, you and I met at the Business of Blockchain event in 2018. I invite you again for another sit-down to review the government's role and partnering with the industry.
Thoughts?
https://www.wsj.com/articles/sec-probes-investment-advisers-use-of-ai-48485279
