Gary Gensler, the head of the U.S. Securities and Exchange Commission, thinks the SEC staff could benefit from increasing their use of artificial intelligence.
In a July 17 speech at the National Press Club, where he later commented on the recent Ripple court decision, Gensler outlined several ways the SEC could use AI to help with oversight. This includes market monitoring, reviewing disclosures, examinations, enforcement actions, and economic analysis.
Gensler said, “The SEC staff could make greater use of AI in carrying out the agency’s role as a securities regulator.”
Between 2018 and mid-2023, the Securities and Exchange Commission took enforcement action against at least 54 cryptocurrency companies. The rate of these actions increased dramatically after the collapse of FTX in November 2022.
Though SEC chair Gary Gensler did not provide specifics on how the agency could utilize AI, he spoke positively about its potential impact on humanity and financial markets. Gensler stated that AI “opens up tremendous opportunities” in areas like healthcare, science, and finance by enabling efficient pattern recognition at scale.
Gensler believes AI is “the most transformative technology of our time,” comparing it to past innovations like the internet and automobile mass production. He sees great potential for AI to create efficiencies across the economy.
Despite his overall positive view on AI, SEC chair Gary Gensler pointed out that many AI systems still have issues around bias, deception, privacy infringement, and conflicts of interest.
He noted that some predictive AI models reflect historical biases, making them less accurate and potentially leading to false predictions. Gensler cited an example where fake AI-generated text falsely claimed he had resigned, highlighting the potential for AI misinformation.
Gensler raised concerns about conflicts of interest arising when AIs are optimized for company interests rather than customer interests. He stated that he has asked SEC staff to make recommendations for addressing such conflicts in interactions with investors.
Additionally, Gensler worries that a few AI monopolies emerging could disrupt the economy and potentially contribute to a future financial crisis. He acknowledges AI has tremendous potential but still has challenges around bias, deception, privacy, conflicts of interest, and concentration of power. The SEC is examining these issues and how to best regulate AI in finance.
In an interview with Yahoo Finance on July 17th, SEC chair Gary Gensler stated the regulator will take enforcement action against those who use AI fraudulently.
Gensler said “Fraud is fraud. If a bad actor uses artificial intelligence to try to deceive the public, we’re authorized and required by Congress to go after that.”
He made clear the SEC will enforce securities laws and regulations if AI is used unlawfully to defraud investors. The agency will not tolerate manipulative or deceptive AI practices that harm investors.
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