Securities regulators in the US state of Massachusetts have initiated an investigation into the utilization of artificial intelligence (AI) in the securities sector, prompted by growing apprehensions about the implications of emerging technologies.
Massachusetts Commonwealth Secretary William Galvin formally announced the investigation on August 3, aiming to delve into how companies are integrating artificial intelligence to engage with investors in Massachusetts.
On August 2, the state's federal securities division dispatched inquiries to both registered and unregistered firms recognized for deploying or developing AI for commercial purposes in the securities industry. The division is seeking data on the extent of these companies' use of AI in their activities and operations.
Companies subject to the investigation have been granted until August 16, 2023, to respond to the regulatory inquiries. The investigation is particularly concerned with the regulatory frameworks companies have in place for AI usage and whether these systems ensure that AI prioritizes customers' interests over the company's own.
The inquiry will also scrutinize the disclosure policies of companies that have already implemented AI. William Galvin highlighted the crucial role US securities regulators play in addressing the potential impact of artificial intelligence on investor protection. He stressed that without proper Safeguards, AI could pose harm to investors.
Additionally, Massachusetts securities regulators are inquiring about marketing materials provided to investors by certain companies, materials that might have been generated using artificial intelligence.
In recent years, the rise of artificial intelligence has sparked global regulatory attention. Large technology companies have significantly increased mentions of AI during earnings conference calls, reflecting its growing importance. However, regulators have expressed concerns about potential risks tied to AI for years. The Financial Stability Board (FSB), for instance, raised alarm bells about AI and machine learning in financial services as early as 2017.
The FSB noted the increasing provision of AI and machine learning services by a handful of major technology corporations, hinting at potential competition and stability risks. The concentration of AI services among a few entities could lead to a natural monopoly or oligopoly. The FSB's warning emphasized that a disruption or bankruptcy of one of these key players could have significant repercussions for the financial industry.
