Good morning, and welcome to the SEC’s roundtable on artificial intelligence (AI).[1] Thank you for joining us today, both in-person and virtually, for this event.
We have invited experts from a wide variety of stakeholders to help educate us on developments in AI, possible use cases for AI in the financial industry, and AI’s potential benefits and risks.
Artificial intelligence involves the use of interrelated technologies to accomplish tasks that previously required human intelligence. However, the incorporation of technology into the financial markets is not new.[2] From stock ticker machines to telephones to computerized networks, the U.S. financial markets have consistently advanced using technological innovations. Our ability to innovate is a fundamental reason why our cost of capital tends to be the lowest in the world and why our capital markets are unmatched in terms of their size, depth, and liquidity. During the SEC’s 90-plus year history, it has consistently dealt with technological changes affecting the financial markets.
Various forms of AI have been used in financial products and services for decades. The use of these technologies has led to enhancements in trading and investing as well as in financial products and processes. Recent developments - driven by ideas, investment, and competition - have enabled new ways for market participants and investors to interact with AI and the markets and have led to an expanding realm of potential uses cases in financial products and services.
Tools incorporating these AI technologies can help digest and extract insights from vast and diverse datasets and other information, leading to enhanced decision-making and operational efficiencies. Advancements in AI are being tested and deployed in applications such as internal task automation, coding, investor communications, and risk management. These technologies may enhance investor interactions and learning and can assist regulators in improving the efficiency of their supervisory and oversight activities.
Financial regulators should take a technology-neutral approach to regulation. I have been concerned with some recent Commission efforts that might effectively place unnecessary barriers on the use of new technology.[3] We should avoid an overly prescriptive approach that can lead to quickly outdated, duplicative rules, a “check the box” approach to compliance, and impediments to innovation. To the extent that advances in technology, such as AI, create potential gaps in our regulatory structure or point to the need for additional guidance, it is the Commission’s responsibility to address those gaps or provide guidance in ways that encourage innovation while protecting investors. The Commission must be mindful of its statutory authority and prioritize effective and cost-efficient regulations in this space.
As with other financial innovations, the use of AI also may bring risks and challenges. AI is a broad term, but risks from the use of AI technologies may largely depend on the specifics of the technology, use case, and deployment at issue. As we evaluate potential risks and challenges arising from the use of AI, we should focus on obtaining relevant data and evidence. To foster a commonsense and reasoned approach to AI and its use in financial markets and services, regulators should be engaging with innovators, technology providers, market participants, and others.
Today is one such engagement. Thank you to the panelists for your time and effort in preparing for this roundtable. Thank you also to the Division of Economic Risk and Analysis, the Division of Examinations, the Office of Support Operations, and the Office of Public Affairs, and the many other Commission staff members who made today’s event possible. I look forward to the discussion.