The field of artificial intelligence (“AI”) is experiencing explosive growth. As the headlines proclaim, the race to become the most successful AI company is on in the private sector, with huge amounts of money driving the rush to become leaders in the field. The push to incorporate AI into banking and other financial markets is equally intense. Spending on AI by financial services companies now exceeds spending on AI in all other industries, including technology. Wall Street megabanks are driving this growth. For example, the five largest investment banks filed 94% of AI-related patents, published two-thirds of AI research papers, and accounted for half of AI investments between 2017 and 2021. Experts predict that financial institutions’ spending on AI will continue to grow, doubling to more than $400 billion from 2023 to 2027.
Regulators have begun to take some initial steps to address the use of AI in finance, primarily in the form of policy statements, guidance, and consumer advisories (discussed in the appendix below). Substantive standards are emerging in several areas, including the SEC’s proposals on predictive data analytics. But if investors are to keep up with advances in AI, they will need to do more and faster. All financial markets from securities to banks and derivatives. And overall financial stability is safeguarded. The growth trajectory of AI and its penetration into every corner of the financial industry requires a new approach to regulation. This effectively embeds an agile and forward-looking regulatory framework, with a focus on consumer protection, ethics, transparency, accountability and financial stability.
Key market improvement materials for AI
Factsheet: Regulators need to carefully consider the benefits and risks of AI in financial markets (March 21, 2024)
Comment Letter: Our team provided our views on the SEC’s proposed rules regarding the use of predictive analytics by investment advisers. (3/26/24)
Comment Letter: SEC’s Predictive Data Analytics Rule Will Help Financial Firms Prevent Use of AI to Harm Investors (10/11/23)
Fact Sheet: SEC Proposed Predictive Data Analytics Rules Are Essential to Protect Investors from Conflicts of Interest as Financial Institutions Increase Use of Artificial Intelligence (10/5/23)
Carefully selected better market AI media
Politico Morning Money: Ideas about AI (3/22/24)
“Better Markets, an advocate for stronger financial regulation, releases a new fact sheet on AI oversight, calling for stronger enforcement and regulatory standards beyond disclosure.
Stephen Hall, legal director at Better Markets, said: “AI demands a new approach to financial regulation, one that effectively embeds an agile and forward-looking regulatory framework to protect consumers, It focuses on ethics, transparency, accountability and financial stability.”
Bloomberg: Wall Street braces for more SEC scrutiny of AI and private finance (12/28/23)
“Supporters of the rule, including Better Markets, a Washington-based group that generally advocates for stricter financial rules, argue that the proposal would help companies keep up with technological innovation and encourage companies to invest more in their own businesses than investors. “I’m interested.” “I’m interested.”
