The United States Securities and Exchange Commission (SEC) is utilizing artificial intelligence (AI) for financial surveillance, confirmed by the SEC Chair, Gary Gensler, during a recent Senate oversight hearing. This reveals an intriguing mix of advanced technology adoption amidst a backdrop of regulatory scrutiny. However, the extent and specifics of AI usage remain semi-opaque adding a layer of uncertainty into the convergence of financial regulation and technology.
Gensler’s confirmation came in response to a query from Sen. Catherine Cortez Masto, with emphasis on the SEC’s need for increased funding to further enhance its technological prowess. The use of AI in market surveillance and enforcement actions highlights the SEC’s adaptation to the digitized and complex landscape of financial transactions. The intent, according to Gensler’s comments, is to identify patterns that might indicate market manipulation or fraudulent activities.
While one cannot help but acknowledge the potential efficiencies and precision that AI introduces to surveillance, some may argue that the use of AI by a regulatory agency warrants more transparency. Public disclosure of tech utilization by public agencies is not necessarily a legal requirement, but the SEC’s quiet embrace of AI raises eyebrows. The question surfaces – should there be a mandatory disclosure policy for public agencies leveraging new technologies?
On the other hand, recognizing the intensive data mining and algorithmic requirements of financial markets, it would only make sense for the SEC to utilize AI to effectively parse voluminous and complex transaction data. Machine learning algorithms can quickly and efficiently analyze massive chunks of data and identify anomalies which quite possibly would slip past human scrutiny.
Despite the positive lights under which AI is often seen, several critical concerns arise. How is the privacy of individual or business financial data maintained? How does the SEC ensure the AI does not bias its decisions? While these concerns should be addressed through robust regulatory policies, the current silence from the SEC deepens these uncertainties.
Combining the effectiveness of AI in recognizing fraudulent patterns and easing the burden on human resources transforms financial surveillance into a more predictable and reliable practice. However, until agencies like the SEC can allay fears relating largely to disclosure and potential misuse of the technology, taking AI from a covert tool to an overt solution will remain a debatable juncture.
Source: Cointelegraph
