SEC Withdraws AI Rule
- Isaac Mamaysky
- Sep 12
- 1 min read
As is the case across industries, AI is transforming the investment advisory landscape. It's enhancing client service, making advisers more efficient, powering investment insights, summarizing client conversations and goals, informing marketing initiatives, and assisting with various compliance obligations.
Unlike many other industries, investment advisors operate in a highly regulated space -- and with innovation comes regulatory attention.
The SEC’s proposed AI rules were withdrawn this past June, but the agency is actively asserting AI oversight through examinations, enforcement actions, and public guidance. SEC concerns include “AI washing” (when advisers claim to use AI in ways that they don't), “black box” algorithms (when advisers don't know how the AI comes to its conclusions), and conflicts of interest (when AI tools favor advisers over clients).
With these and various other concerns in mind, the SEC is relying on existing securities laws to govern AI-related practices, even in the absence of formal rules. For example, in a few recent settlements/enforcement actions, the SEC relied on established anti-fraud principles to crack down on false claims about the use and implementation of AI (i.e., AI washing).
The SEC's focus on AI is only increasing, so it makes good business sense for advisers to specifically consider how their existing compliance policies and regulatory principles apply to their new uses of AI.
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