TLDR: US Senators Try to Defeat AI Regulations on Wall Street

Key Points:

• Republican senators introduced the Protecting Innovation in Investment Act to block the SEC’s proposal to restrict the use of AI in financial investment firms.
• The SEC wants to prevent advisers and brokers from using data analytics, artificial intelligence, machine learning, and similar technologies in scenarios where there could be a conflict of interest with investors.
• The senators believe that preventing the use of AI will hurt investors and prevent them from utilizing the technology to their own benefit.
• The senators argue that the SEC’s proposed rules are too burdensome and would prevent the deployment of new technologies in financial applications.

Republican senators Ted Cruz and Bill Hagerty have introduced the Protecting Innovation in Investment Act to block the US Securities and Exchange Commission’s (SEC) proposal to restrict the use of AI in financial investment firms. The SEC’s proposed changes would prohibit advisers and brokers from using data analytics, artificial intelligence, machine learning, and similar technologies in situations where there may be a conflict of interest with investors.

SEC chair Gary Gensler has expressed concern that the latest software tools could allow financial firms to prioritize their own interests over those of investors. However, Cruz and Hagerty believe that restricting the use of AI will harm investors and prevent them from benefiting from the technology. They argue that new technologies have expanded access to the stock market for more Americans and that the SEC’s rules would undermine this progress.

The SEC’s proposed rules would require firms to identify and eliminate conflicts of interest associated with the use of predictive data analytics-like technologies. Broker-dealers and investment advisers would also need to maintain records detailing the technologies they have implemented and their use to prove that there is no conflict of interest. However, the senators believe that these requirements would place an “enormous” burden on Wall Street and other firms, hindering the deployment of new technologies in financial applications. They also criticized the language used in the Commission’s rules as being too loose.

As of writing, the SEC has not provided a comment on the proposed legislation. The Protecting Innovation in Investment Act is an attempt by Republican senators to block the SEC’s efforts to regulate the use of AI in the financial industry.