SEC Exam Sweeps for AI Use | Chuck Martin Reacts on WSJ
Vigilant Insights
Introduction
The use of Artificial Intelligence (“AI”) by RIAs is one of many focuses for the SEC’s Division of Examinations.
With the SEC’s Proposed Rule related to AI use under consideration, some firms been targeted and have received requests for information through an AI Sweep Exam related to their use of AI.
Vigilant’s Chief Operating Officer, Chuck Martin, MBA, discussed this recent development with the Wall Street Journal.
Chuck Martin Reacts
The article highlights the implications of SEC Sweeps regarding AI, and the differing motivations for performing the Sweep.
Although suspicions of misconduct are possible, the SEC also achieves important data collection during sweeps that aid them in other decision making.
Chuck Martin adds that the information from SEC Examinations can be used to reinforce their case for rule changes. He mentions that risk alerts from the SEC, a useful tool in the industry for maintaining compliance, can be informed by data gained from examinations and sweeps.
Vigilant’s Conclusion
The SEC has indicated that they have major concerns about the use of AI by Investment Advisers.
It is important for firms to evaluate their use of technology and ensure that any potential conflicts of interest that could arise from data analytics are identified and addressed.
Additionally, if any vendors that fall under due diligence expectations use AI, proper supervision is vital for success.
As this area develops, it is important that you partner with professionals that hundreds of years of compliance experience and deep industry insight to the table.
Reach out to Vigilant for any questions or concerns you may have.