Navigating AI Systems In Capital Markets: Recent Guidance From The CSA

Introduction

On December 5, 2024, the Canadian Securities Administrators (CSA) published a notice intended to provide clarity and guidance on how securities legislation applies to the use of artificial intelligence (AI). Staff Notice and Consultation 11-348 – Applicability of Canadian Securities Laws and the use of Artificial Intelligence Systems in Capital Markets (the Staff Notice) sets out the following critical points on the use of AI in capital markets:

• Key considerations: The Staff Notice outlines essential considerations for various entities such as registrants, reporting issuers, and other market participants that may utilize AI systems. The Staff Notice defines "AI system" as "a machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments".