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ARTICLE · 10 AUGUST 2023

SEC Announces New AI Rules For Financial Services Companies

Lewis Brisbois Bisgaard & Smith LLP
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On July 26, 2023, the U.S. Securities and Exchange Commission (SEC) announced new proposed rules for regulating brokerages and money managers using artificial intelligence (AI) to serve their clients.

United StatesTechnology
Paul Kisslinger
Paul Kisslinger
Sean P. Shecter
Sean P. Shecter
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Washington, D.C. (August 8, 2023) - On July 26, 2023, the U.S. Securities and Exchange Commission (SEC) announced new proposed rules for regulating brokerages and money managers using artificial intelligence (AI) to serve their clients. The SEC's plan aims to address concerns about potential conflicts of interest that arise when financial services firms use the burgeoning technology. Companies and individuals in the financial industry should take note.

The SEC's proposed new rules would require companies to evaluate their use of AI and predictive data analytics for whether they create conflicts of interest. Money managers have fiduciary duties to their clients. If an adviser's AI tool provides a client with bad advice, recommending a risky asset that would not fit the client's risk appetite and causes financial loss, the AI may end up compromising the client's best interests. If an AI tool gives rise to such conflicts, companies would be required to eliminate the

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