SEC Chair Gary Gensler Envisions AI Empowering Stronger Enforcement Measures

Gary Gensler, the chair of the United States Securities and Exchange Commission (SEC), expressed his belief that the agency’s enforcement capabilities could be enhanced through the increased use of artificial intelligence (AI) by its staff.

During a speech at the National Press Club on July 17, Gensler highlighted several potential applications of AI that could assist the SEC in its role as a securities watchdog. He emphasized the importance of utilizing AI in market surveillance, disclosure review, examinations, enforcement actions, and economic analysis.

The SEC has taken enforcement actions against at least 54 cryptocurrency firms between 2018 and the first half of 2023, with a notable uptick following the collapse of FTX in November.

While Gensler did not delve into specific details regarding the agency’s AI implementation, he expressed enthusiasm for the technology’s potential and its impact on financial markets and humanity at large. Gensler stated that AI offers tremendous opportunities in various sectors, ranging from healthcare to science and finance, and emphasized its transformative nature akin to the internet and mass production of automobiles.

However, Gensler acknowledged that challenges persist in the realm of AI. He highlighted issues such as bias, privacy concerns, and conflicts of interest inherent in AI systems. Biases can be perpetuated when predictive AI models reflect historical biases, leading to less accurate predictions and potential misinformation. Gensler himself experienced this when a fake AI-generated text of his resignation circulated online.

Regarding conflicts of interest, Gensler expressed the need for SEC staff to propose rule recommendations on how to address potential conflicts across various investor interactions. He also warned of the emergence of AI monopolies and their potential impact on the economy, including their role in future financial crises.

Gensler emphasized that the SEC remains committed to combating fraudulent activities facilitated by AI. The agency will take enforcement action against any bad actors who attempt to deceive the public using artificial intelligence.

As the SEC embraces AI as a tool to strengthen its enforcement regime, Gensler recognizes the need to address inherent challenges and ensure AI systems are used responsibly to protect investors and maintain market integrity.

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