SEC Chair Discusses AI's Potential Impact and Risks in Finance and Law
Summary:
SEC Chair Gary Gensler used a 2013 film, 'Her', to explain the potential risks and benefits AI can pose in finance and law in a talk at Yale Law School. Discussing AI's impact on investors, issuers, and market intermediaries, he stressed the need for appropriate legal and regulatory guardrails for AI systems in the financial sector. Gensler also voiced his belief that a financial crisis from widespread AI use would be nearly unavoidable without safeguards. He has served as SEC Chair since April 2021, with his term set to end in 2026.
In an address to Yale Law School on February 13, Chairman of the United States Securities and Exchange Commission (SEC) Gary Gensler, leveraged examples from a 2013 film to discuss artificial intelligence (AI), in lieu of recent developments in chatbots and photo rendering. Using the film 'Her', featuring Joaquin Phoenix and Scarlett Johansson, Gensler elucidated the possible advantages and dangers AI may pose in legal and financial settings. In the film, Johansson voices an AI system that forms a romantic relationship with Phoenix's character, a hypothetical scenario that, as per Gensler, could undermine financial stability.
Gensler proposed a situation where, instead of Johansson, over 8,000 financial establishments rely on some basic data source or model, predicting that "AI may play a central role in the after-action reports of a future financial crisis". The SEC is focusing on how AI evolution could impact investors, market intermediaries, and issuers on all scales.
Gensler's exposition on AI and its potential repercussions also referred to multiple films dating back to the 1980s. He emphasized that any AI system that could find its place within financial environments ought to have "appropriate guardrails" considering relevant laws and regulations. In his view, as SEC registrants disclose more about AI, the fundamental principles of good securities practice continue to apply: claims about prospects must be reasonably grounded, and the basis should be clearly communicated to the investors.
Although Gensler has been vocal about his reservations pertaining to digital assets’ usage in conventional financial institutions, he has also recognized the prospective advantages the SEC could reap from sophisticated AI models. According to reports, in October 2023, he declared that a financial crisis originating from AI's widespread utilization would be “nearly unavoidable” absent safeguards.
Since April 2021, Gensler has led the SEC, intending to serve until 2026. In his tenure, the commission has pursued enforcement actions against several crypto companies, including seriously established names like Binance, Coinbase, and Kraken.
Published At
2/13/2024 11:29:31 PM
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