Within wealth management we are besieged with headlines about the evils of artificial intelligence (AI).  Most recently the Securities and Exchange Commission (SEC) announced settled charges against Delphia (USA) Inc. and Global Predictions Inc. for making false and misleading statements about their use of AI.  As new securities and technologies have been introduced, it’s a tale as old as time that there will always be those that attempt to misuse and manipulate to make a profit.  

Given this, it’s even more important that compliance programs and regulators embrace AI for their own uses for detection and prevention.  When FDR first named Joseph Kennedy as the head of the SEC in 1934, he famously stated “It takes a thief to catch a thief”.  The SEC has been open and forthcoming about their intended use of AI to help them monitor markets for possible misconduct as the technology develops.  The willingness of regulators to stay abreast of changes within the technology industry should signal to all Compliance Officers that AI will find a place within wealthtech.  

What is responsible AI and how can compliance programs benefit? Responsible AI refers to the ethical and accountable use of artificial intelligence technologies, where AI systems are designed and deployed in a manner that respects legal, ethical, and societal norms. With the growing prevalence of AI-powered solutions in the financial services sector, it is crucial for businesses, including Registered Investment Advisors (RIAs), Broker-Dealers (BDs), and organizations regulated by the Financial Industry Regulatory Authority (FINRA), to adopt responsible AI practices. This ensures the resilience of compliance processes in line with regulatory requirements.

As technology continues to revolutionize the financial services industry, adopting responsible AI practices becomes essential for achieving compliance excellence. By prioritizing responsible AI, financial services providers, including RIAs and BDs, can ensure regulatory compliance, enhance risk management, foster customer trust, and safeguard sensitive data. The integration of AI-powered compliance tools, ethical frameworks, data governance, and human oversight paves the way for responsible AI adoption, setting a higher standard in the industry and contributing to a more trustworthy and ethical financial services ecosystem.

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Resources used:

SEC.gov| SEC Charges Two Investment Advisers with Making False and MisleadingStatements About Their Use of Artificial Intelligence

SEC.gov | The Roleof Big Data, Machine Learning, and AI in Assessing Risks: a RegulatoryPerspective

JosephP. Kennedy Sr. - Wikipedia

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Key Terms: AI, Artificial intelligence, Compliance, Cco, Wealthtech, Responsible ai, SEC, Compliance officer