SIFMA, SIFMA AMG Support Existing Risk-Based Rules to Govern AI

Washington, DC, September 10, 2024 – SIFMA and SIFMA’s Asset Management Group (SIFMA AMG) today issued a whitepaper on artificial intelligence (AI) titled “Promoting Investor Success, Industry Innovation and Efficiency with AI.”

The paper highlights the increased efficiencies realized from the application of AI and notes that, while new technologies may present certain risks, financial services firms have in place well-established legal and regulatory governance frameworks designed to address these risks, regardless of the technology used.  Accordingly, SIFMA calls for policymakers and regulators to apply existing risk-based rules and guidance to the deployment of AI and other new technologies in the markets, rather than engaging in any technology-specific rulemakings that will likely be outdated before they are finalized.

“The use of AI in the financial services industry is not new, but advancements in AI, particularly in generative AI, have heightened interest and concerns about the use of this technology,” said Melissa MacGregor, deputy general counsel and corporate secretary, SIFMA.  “Existing legal and regulatory frameworks are designed to be risk-based, technology agnostic, and flexible enough to address the use of AI and other emerging technologies, which we believe is the right approach.  Going forward, use of AI will continue to increase, and we believe the legal or regulatory responses to it should be aimed at facilitating the responsible use of AI, appropriately addressing risks without stifling innovation.”

The whitepaper highlights several key points SIFMA believes will be useful to consider as part of the ongoing discussions related to the use of AI in the industry, including:

• Laws and regulations governing the financial services industry should remain focused on addressing activities and outcomes. This technology agnostic approach encourages innovation within the industry without sacrificing the safety of financial markets.
• Existing laws and regulations governing the financial services industry have proven effective in addressing the use of emerging technologies in the industry, including AI.
• There is no need to adopt a precise definition of AI at this time because AI is an evolving technology, and adopting a technology agnostic approach to the use of AI will likely render a definition unnecessary.
• Policymakers and regulators should collaborate with firms in the financial services industry to understand the uses of AI and its related benefits and risks. Additional regulatory action should only be considered if the existing laws and regulations do not address novel risks that are identified.
• Any regulatory action should be flexible enough to continuously adapt to evolving technology. Prescriptive rules can lead to inconsistent regulations across jurisdictions and will also deter innovation that could benefit all market participants, including investors.
• Existing laws and regulations recognize that management at financial services firms are best positioned to identify emerging risks and the impact they could pose to their businesses. Firms should continue to retain this flexibility when determining how to address the use of AI and other emerging technologies.
• Policymakers should assess how other existing areas of law and regulation apply to the use of AI in the financial services industry and consider strategies for mitigating potential risks, including in the areas of federal data privacy legislation and copyright ownership.

The paper is available at the following link: https://www.sifma.org/resources/general/ai-white-paper-promoting-investor-success-industry-innovation-and-efficiency/

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development.  SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).