SIFMA put out a white paper this week on artificial intelligence (AI) that probes the use of AI within the financial services industry.
The paper, titled “Promoting Investor Success, Industry Innovation and Efficiency with AI,” examines the increased efficiencies that stem from the application of AI.
It also urges regulators to apply existing risk-based rules and guidance to AI and other new technologies in the markets. This is preferable to engaging in any technology-specific rulemakings that will likely be outdated before they are finalized, SIFMA officials said.
“The use of AI in the financial services industry is not new, but advancements in AI, particularly in generative AI, have heightened interest and concerns about the use of this technology,” Melissa MacGregor, deputy general counsel and corporate secretary, SIFMA, said. “Existing legal and regulatory frameworks are designed to be risk-based, technology agnostic, and flexible enough to address the use of AI and other emerging technologies, which we believe is the right approach. Going forward, use of AI will continue to increase, and we believe the legal or regulatory responses to it should be aimed at facilitating the responsible use of AI, appropriately addressing risks without stifling innovation.”
The white paper highlights several key points to consider in the ongoing discussions related to the use of AI in the industry. They include:
• Regulations should remain focused on addressing activities and outcomes. This approach encourages innovation within the industry without sacrificing the safety of financial markets.
• Existing regulations have proven effective in addressing the use of emerging technologies in the industry, including AI.
• There is no need to adopt a precise definition of AI at this time because AI is an evolving technology, and adopting a technology agnostic approach to the use of AI will likely render a definition unnecessary.
• Regulators should collaborate with firms in the financial services industry to understand the uses of AI and its related benefits and risks. Additional regulatory action should only be considered if the existing laws and regulations do not address identified risks.
• Any regulatory action should be flexible enough to continuously adapt to evolving technology. Prescriptive rules can lead to inconsistent regulations across jurisdictions and will also deter innovation.
• Existing regulations recognize that financial services firms are best positioned to identify emerging risks and the impact they could pose to their businesses.
• Policymakers should assess how other existing areas of law and regulation apply to the use of AI in the financial services industry and consider strategies for mitigating potential risks. This includes the areas of federal data privacy legislation and copyright ownership.