Massachusetts securities regulator seek to ensure that the securities industry’s artificial intelligence applications will not affect users’ interests.
Concerns regarding the impacts of artificial intelligence have evoked the need for Massachusetts’s securities regulator to launch an investigation into the utilization of this technology.
Regulator Investigate Organizations Use of AI
On August 3, William Galvin, Massachusetts’s Secretary of the Commonwealth, declared an investigation concerning organizations’ utilization of artificial intelligence to interact with investors.
On August 2, the commonwealth’s securities division penned inquiry letter to several registered and unregistered companies identified as utilizing or creating artificial intelligence for business reasons in the securities industry.
The regulator acquired information concerning how organizations might run their operations and activities using the technology. The companies involved in the investigation have up to August 16 to respond to inquiries by the authority.
The regulator claimed that Galvin’s major interest entails the supervisory procedures that organizations have in place concerning AI and if the systems ensure that this technology will not just consider the firm’s interests and disregard those of clients. The securities division will also assess companies’ disclosure policies that have already utilized them.
Securities Regulators Assume Protective Role in AI Use in Investments
Galvin claimed that securities regulators play a vital role concerning artificial intelligence and its likely impacts on investor safety. Specifically, he disclosed that it may harm investors when used without the guardrails needed to ensure appropriate disclosure and conflict consideration.
Further, the securities regulators in Massachusetts are questioning specific firms concerning the marketing materials offered to investors that might have been developed using artificial intelligence.
In current years, artificial intelligence has become a major international regulatory concern owing to the technology’s quick growth. In 2023’s second fiscal quarter, mentions concerning the technology earning calls of big tech firms escalated. For instance, organizations such as Intel cited artificial intelligence almost 300 percent more in the second quarter as compared to the first quarter.
Regulators Express Concerns Regarding AI Risks
For some years, some major regulators have expressed concerns regarding the risks associated with artificial intelligence. For instance, in 2017, the Financial Stability Board (FSB) raised the alarm concerning this technology and machine learning in financial services.
Specifically, the international body claimed that a small handful of major technology companies were increasingly offering artificial intelligence and machine learning services. It also wrote that the potential for oligopolies or natural monopolies exists, and competition problems may result in financial stability risks.
At the time, the regulator argued that in case one of them were to experience insolvency or significant disruption, major consequences in the finance world would be experienced.
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