SEC AI Roundtable | Key Takeaways
SEC Releases
Introduction
On Thursday, March 27th, 2025, the SEC hosted a Roundtable that specifically focused on Artificial Intelligence (“AI”) in the financial industry.
As the financial industry continues to integrate and experiment with generative AI, both its potential and its risks are becoming increasingly evident. AI technologies, particularly those in the realm of generative AI, are transforming how Firms manage cybersecurity, market practices, and customer relationships. However, these advancements also present new challenges, including the growing threat of fraud, difficulties in tracking and managing risks, and concerns over market manipulation.
For those that were unable to attend the SEC AI Roundtable, we have provided key takeaways from the panels surrounding AI’s role in the finance industry.
From the rise of AI-driven fraud targeting investors to the on-going efforts to safeguard against cyber threats, our key takeaways highlight how Firms are navigating these complexities. It also explores the broader implications for governance, AI integration, and the evolving role of human oversight in an increasingly automated world. As firms continue to innovate, it’s clear that balancing AI’s benefits with effective risk management will be essential for long-term success.
SEC AI Roundtable Key Takeaways
Firm Practices:
- Governance and Risk Management: Establish AI governance, mandatory training, and risk management frameworks.
- Risk-Based Approach: Firms are adopting AI cautiously, applying governance frameworks based on risk levels.
- AI Training: Continuous training, especially for younger individuals familiar with AI technologies.
- AI in Internal Processes: AI is increasingly used in internal processes (e.g., code generation, knowledge management) rather than client-facing roles.
Long-Term Considerations:
- Critical Thinking: Over-reliance on AI could weaken critical thinking skills. On-going training and business understanding are essential as AI evolves.
- Industry Adaptation: As AI technology advances, Firms must be proactive, ensuring proper governance, testing, and oversight.
- Transition Challenges: Some roles in the workforce may be displaced by AI, but the industry must carefully manage the transition and retraining efforts.
Suggestions for Protecting Investors:
- AI Use: AI can assist with KYC (Know Your Customer) processes, monitoring financial transactions, and fraud prevention.
- Regulatory Oversight: Continuous updates to fraud protocols and tools to improve information quality.
- Due Diligence: Firms must perform thorough due diligence before implementing AI tools.
Generative AI in Finance:
- Partial vs. Full Automation: While generative AI shows potential for cost reduction and efficiency, full automation is still far off. Most firms are experimenting with partial automation.
- Risk Management: AI is used for risk management, capital management, and operational support, but quantifying ROI remains a challenge.
- Data Mapping & AI Integration: AI is being used to map data and personalize user experiences, but firms are still figuring out the balance between human and AI involvement.
- Governance: On-going monitoring, testing, and risk management frameworks are crucial to prevent issues and ensure accountability.
Challenges with AI in Finance:
- Bias and Fairness: AI systems can introduce bias, depending on data input and prompts, which raises concerns about fairness and liability.
- Cost and Talent: The high cost of AI development and the competition for talent are challenges for firms. Data hygiene and monitoring are critical for success.
- AI Limitations: While AI can assist in areas like due diligence and creating spreadsheets, it cannot replace human relationships and social interactions.
- Industry Adoption: Finance is slow to adopt AI, focusing more on internal processes before client-facing applications. Firms continue to evaluate risks and experiment with AI use cases.
Vigilant’s Conclusion
In conclusion, while AI holds great promise for improving efficiency, security, and market management in finance, it also brings significant challenges, including fraud risks, bias, and the need for robust governance frameworks.
Maintaining a proactive Compliance Program surrounding AI remains crucial and is a step firms need to be taking if they have not already. To establish a proactive Compliance Program for AI, it is crucial for Firms to take a comprehensive, forward-thinking approach. This involves not only integrating AI technologies effectively but also ensuring that appropriate governance structures, risk management frameworks, and continuous oversight are in place.
If you need support in implementing a proactive Compliance Program surrounding the oversight of AI and its internal use, contact Vigilant today.