Deep into the era of artificial intelligence (AI), it is no surprise that Massachusetts has raised its regulatory brows on the use of this technology within the securities industry. As disruptive as AI has been, and continues to be, it is undoubtedly developing a few spiders’ webs that need some monitoring. A case study of this issue is the recently instigated probe by Massachusetts authorities, which throws a spotlight on AI and its potentially dire implications.
In the clearest sense, Massachusetts Secretary of the Commonwealth, William Galvin, instigated an investigation to inspect ways in which businesses interact with AI, and its impact on Massachusetts investors. Firm’s included in the investigatory sweep are known to use or have plans for incorporating AI in their business strategy. The concern? Whether the AI systems set in place subtly prioritize the interests of the firm over their clients. Correspondingly, they also plan to delve into firms’ disclosure policies for those who have already integrated AI.
What makes this probe rather interesting is Galvin’s view that US securities regulators must play a fundamental role concerning AI and preserving the interests of investors. Whirling around his mind is the fear that without the appropriate safety measures in place, AI could inadvertently cause harm to investors. Likewise, the Massachusetts securities regulators are also scrutinizing companies about their AI-created marketing materials presented to investors.
The rise in regulatory apprehensions around AI is unsurprising. This coincides with the explosion of AI mentions in earnings calls for major tech firms like Intel in the second quarter of 2023, soaring by roughly 300% more than the first-quarter call.
However, potential risks linked to AI have been around for a while. For instance, the Financial Stability Board in 2017 expressed concerns on both AI and machine learning in financial services. They pointed out these services were mostly provided by only a handful of technology companies, creating the possibility of monopolies or oligopolies. This type of competition scenario could result in unstable financial standings.
While AI has undoubtedly opened doors to innovative financial management and interactions, a key question remains — How do we ensure it serves the best interests of its users, not just the firm’s? The quest for answers is reinforcing the need for careful analysis and regulation of AI in burgeoning fields like the securities industry.
Source: Cointelegraph
