Publicly traded companies need to avoid “AI wash” when talking to investors about their use of technology, according to the head of the U.S. Securities and Exchange Commission.
SEC Chairman Gary Gensler said Tuesday that companies need to be clear with investors what they mean when they refer to artificial intelligence. Companies will need to specify how the technology will be used, the risks to operations, and decide whether they need to disclose management comments about the technology to investors.
“Despite the rise in AI disclosure by SEC registrants, the fundamentals of being a good securities lawyer still apply,” Gary Gensler said in a lecture at Yale Law School.
Companies across industries are touting how they can leverage AI to improve their operations. More than 40% of S&P 500 companies discussed this technology in their annual reports to the SEC, according to a recent Bloomberg Law analysis. Financial companies are also leveraging this technology in everything from lending to trade recommendations.
Gensler previously called AI “the transformative technology of this generation,” but also warned of the dangers it could pose to financial stability. The SEC recently proposed new regulations that would govern how securities and investment firms use this technology.
Industry groups such as the American Securities Association, which represents financial advisers, have criticized the proposal as too broad and would leave most firms unable to communicate with their customers.
systemic risk
In his speech Tuesday, the SEC chairman once again warned about the technology’s potential impact on financial stability. He expressed concern about the potential for thousands of financial institutions to all use the same underlying AI model, reinforcing bias. He warned that economies of scale and network effects will almost certainly lead to concentration among AI providers.
