Gary Gensler, the chairman of the Securities and Exchange Commission (SEC) in the United States, has issued a warning that future financial crises will be centered on artificial intelligence (AI) technology. To address some of the potential problems with AI models, the securities regulator has released a specific suggestion.
Gary gensler, chairman of the us securities and exchange commission (sec), has announced an ambitious plan to govern the crypto and decentralized finance (defi) sector.
— Zymir Hogg (@zymir_hogg) August 7, 2023
SEC Chair Gensler on AI and Financial Crises
In an interview with Dealbook’s Ephrat Livni on Monday, Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), listed some of his main worries about artificial intelligence (AI). The emergence of generative AI tools like Chatgpt shows how ready this technology is to revolutionize industry and society.
📣 Just in: SEC Chair Gensler has addressed the potential impact of AI on future financial crises. According to the regulator, artificial intelligence could potentially increase financial fragility by encouraging herding behaviors. Find out more here: https://t.co/OO78QiBtit
— DeFI Alliance DAO (@DeFiAlliance_) July 17, 2023
The head of the SEC stated:
Future financial problems will be centered around this technology. It has to do with this potent system of scale- and network-based economics.
Gensler expressed worry that some AI systems would give corporate goals a higher priority than investor interests, creating potential conflicts of interest. He emphasized that “you’re not supposed to put the broker ahead of the investor” and “you’re not supposed to put the adviser ahead of the investor,” adding that the SEC has “put out a specific proposal about addressing those conflicts that could be embedded in the models.”
For those who will soon try to defend the @SECGov by saying that Bill Hinman was the only corrupt SEC official. Jay Clayton himself, the head of the SEC, stated that Hinman led the SEC Division of corporate finance his by example. pic.twitter.com/xsuzmUjXbz
— Mr. Huber🔥🦅🔥 (@Leerzeit) June 9, 2023
Additionally, the SEC chairman is worried about generative AI providing bad investment advice. According to the law, investment advisers have a responsibility of care, a duty of loyalty, and a fiduciary duty to their clients, he said. You have the same duty of care regardless of whether you’re utilizing an algorithm.
The SEC chairman expressed his reservations regarding the use of AI last month. “AI may also make ensuring fairness more challenging. The conclusions reached by its prediction algorithms might be based on information that reflects previous biases as well as hidden qualities that might unintentionally serve as substitutes for protected characteristics, the expert said.
Days before the collapse of Bear Stearns in 2008, SEC chairman expressed "comfort about the capital cushions" in finance industry…Duh.
— John T Marohn (@johntmarohn) January 25, 2012
However, according to Gensler, “AI is going to continue significantly transforming science, technology, and commerce.” He thinks that the employees of the securities regulator “could benefit from staff making greater use of AI in their market surveillance, disclosure review, exams, enforcement, and economic analysis.”