Artificial Intelligence, the SEC, and What the Future May Hold

The advances and integration of artificial intelligence (AI) in financial markets are raising novel risks for broker-dealers and investment advisors. The risks include, but are not limited to conflicts of interest, market manipulation, deception, fraud, data privacy, and discrimination. Recognizing the risks, the U.S. Securities and Exchange Commission (SEC) have already proposed laws and established a specialized team to address emerging issues and risks around AI. Given the current and proposed regulatory framework, it is vital for broker-dealers and investment advisors to assess their use of AI, including future use, and put guardrails to ensure that their customers are protected.