SEC Director of IM Discusses AI in Investment Management
SEC Releases
Introduction
In recent remarks at the ICI Winter Board Meeting, Brian Daly, Director of the SEC’s Division of Investment Management, discussed how AI could reshape the future of Investment Management.
His message focused on modernizing outdated practices, improving investor understanding, and thoughtfully addressing the regulatory challenges that come with emerging technologies.
Key Takeaways from Brian Daly’s Speech
- Regulatory questions remain unresolved.
- Daly acknowledged open issues around whether AI tools could be considered marketing, investment advice, or require registration, and who would be responsible if AI-generated information is inaccurate. There is also concern of how would it be supervised as well.
- The industry is overdue for modernization.
- Daly noted that Investment Management technology and disclosure practices have changed very little over the past two decades, creating a missed opportunity to evolve how Firms communicate with investors.
- AI could transform investor disclosures.
- Large language models and AI tools could allow investors to ask plain-English questions and receive clear, tailored explanations about Fund strategies, fees, risks, and conflicts which could make disclosures more usable and accessible.
- Digitizing PDFs is not true innovation.
- Simply delivering disclosures electronically does not meaningfully improve investor understanding. Daly encouraged the industry to rethink disclosures entirely, rather than replicate paper in digital form.
- The SEC is open to collaboration.
- Rather than issuing immediate rules, the Division is encouraging dialogue, pilot programs, and engagement with industry participants to responsibly explore AI innovation.
Vigilant’s Conclusion
Daly’s remarks signal that the SEC views AI as a significant opportunity to improve investor understanding and engagement, not just a compliance challenge.
While regulatory questions remain, the Division of Investment Management is inviting the industry to help shape how AI can be used responsibly, balancing innovation with investor protection as the next phase of Investment Management takes shape.