SEC Moves Closer to Regulating AI for Brokers and Advisers

By: Brian S. Korn
– Daily Journal

Manatt Financial Services Partner Brian Korn wrote an article for Law360 about the Securities and Exchange Commission’s (SEC) approach to addressing issues related to the use of artificial intelligence (AI) in investment decision making and its proposed rules affecting brokers and investment advisers.  

In July 2023, the SEC proposed a rule to tackle issues related to conflicts of interest associated with the use of predictive data analytics. Since then, Korn explained, regulators have discussed whether this new rule was comprehensive enough and raised further concerns about the risks of market manipulation and fraud as well as confidentiality breaches. An SEC Investor Committee meeting in June highlighted the difficulty the Commission is having in approaching the space.  

Although AI technologies like predictive data analytics aim to make company functions more efficient, regulators are concerned that it lacks accountability and does not compare to the human aspect of a licensed professional, Korn wrote. “As with all institutions dealing with possible regulation of AI, technology and its applications will proceed at a fast pace. Regulators are being careful not to stifle innovation or implement rules that will quickly be eclipsed or made irrelevant soon after their passage,” Korn said. 

Read the full article here.



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