United States: SEC’s Approach to Artificial Intelligence Begins to Take Shape
By: Jennifer L. Klass, and Pablo J. Man
On 27 March 2025, the US Securities and Exchange Commission (SEC) hosted a roundtable on Artificial Intelligence (AI) in the financial industry that was designed to solicit feedback on the risks, benefits and governance of AI.
The roundtable served, in part, to “reset” the SEC’s approach to AI after the prior administration’s highly-criticized attempt to regulate the use of predictive data analytics by broker-dealers and investment advisers. Acting Chair Uyeda emphasized the importance of fostering a “commonsense and reasoned approach to AI and its use in financial markets and services.”
The Roundtable discussion focused on a few common themes:
- The Commissioners as well as many panel participants emphasized the need to take a technology-neutral approach to regulation and to avoid placing unnecessary barriers on the use of innovative technology.
- While generative AI presents tremendous opportunities, there are various risks, including around fraud, market manipulation, authentication, privacy and data security, and cybersecurity. Many of the benefits of generative AI (e.g., the ability to access and synthesize enormous amounts of data and to hyper-personalize content) also make it an effective tool for fraud.
- Governance and risk management of AI is critical and there are different approaches to managing and mitigating risk, including through data management, sensitivity analysis, bias testing, and keeping a “human in the loop” to validate the output of generative AI models.
- Any control structure should be risk-based and should take into consideration the type of AI and the specific use cases. In particular, advisers should consider the risks of employing “black box” algorithms, where it’s not always clear how inputs are weighed or outputs derived.
This is the first public engagement regarding AI under the current administration and although the SEC is taking a deliberative approach, Commissioners Uyeda’s and Peirce’s statements suggest that the SEC will act if it sees gaps in current regulation or the need for guidance in this area.