Gary Gensler, Chair of the Securities and Exchange Commission (SEC), warned Monday that the monopolization of artificial intelligence (AI) development for financial markets applications could destabilize the global economy. “AI may heighten financial fragility,” Gensler said in prepared remarks before the National Press Club in Washington. “It could promote herding with individual actors making similar decisions because they are getting the same signal from a base model or data aggregator.”
Gensler has asked the agency’s staff to recommend potential regulations addressing ways AI might be optimized to benefit intermediaries at investors’ expense. He noted that “conflicts may arise to the extent that advisers or brokers are optimizing to place their interests ahead of their investors’ interests.”
The SEC chair warned that failing to regulate AI could endanger the global economy by “exacerbating the inherent network interconnectedness of the global financial system.” He added, “Thus, AI may play a central role in the after-action reports of a future financial crisis.” Gensler believes that risk management tools alone cannot stem the risks advanced AI tools pose to the U.S. and global financial systems, and that existing guardrails have become outdated amid “a new wave of data analytics” breakthroughs.