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On a more micro level, companies need to be aware of how their use of AI may implicate securities rules, he said. Whether it is used for financial fraud, juicing corporate returns or steering investors toward specific products, the SEC will be on the lookout, Gensler said.
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“AI may heighten financial fragility as it could promote herding with individual actors making similar decisions because they are getting the same signal from a base model or data aggregator,” he said in remarks prepared for a speech on Monday before the National Press Club in Washington. “While current model risk management guidance — generally written prior to this new wave of data analytics — will need to be updated, it will not be sufficient.”
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