Regulatory & Compliance | 11.08.23
Gensler Says Proposal on AI Conflicts Aligns With Reg BI
A proposal targeting potential conflicts of interest for financial advisors using artificial intelligence (AI) is not meant to modify Regulation Best Interest (Reg BI), U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler said at a recent industry event. The SEC over the summer introduced a proposed rule that would require investment advisors and brokers to remediate conflicts related to interactions with investors conducted through AI, predictive data analytics and similar technology. Under the proposal, advisors and brokers would have to eliminate or neutralize conflicts that arise when an algorithm encourages an investor to purchase an investment product or follow a strategy that does more to increase the advisors’ revenues than the investors’ returns. Asked at the event whether the regulator is trying to make the proposal consistent with Reg BI requirements, Gensler said, “Largely speaking, yes. We’re not trying to change Reg BI or change the fiduciary guidance."
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