Massachusetts Probes AI Use in the Securities Industry

Massachusetts Probes Potential Conflicts of Interest from AI in the Securities Industry

Massachusetts's securities authorities have opened an inquiry into AI Applications in the Securities Industry after growing more worried about the potential effects of the new technology.

A formal examination of how businesses engage with Massachusetts investors while using AI was officially announced on August 3 by Massachusetts Secretary of the Commonwealth William Galvin.

On August 2, the securities division of the commonwealth addressed letters of inquiry to several registered and unregistered companies that were rumored to be utilizing or developing AI for commercial reasons in the securities sector. Data on how businesses could be utilizing AI in their operations was sought after by the authority.

To reply to the regulator's questions, the companies covered by the investigational sweep have until August 16, 2023.

According to the regulator, "Galvin is particularly interested in the artificial intelligence supervisory procedures that firms have in place and whether those systems ensure that the AI will not put the interests of the firm ahead of the interests of their clients." The securities division will also be reviewing the disclosure practices for those companies that have already used AI.

The Massachusetts Securities Regulation Commission is also interrogating a few corporations about any investor-facing marketing materials that could have been produced with the use of artificial intelligence.

In response to Coin Telegraph's request for comment, the Massachusetts Securities Division was unavailable right away.

As a result of the technology's explosive expansion in recent years, AI has rapidly become a global regulatory problem. Major tech businesses made a dramatic increase in the use of AI during their earnings calls in the second fiscal quarter of 2023. Companies like Intel, for instance, spoke about AI approximately 300% more frequently in Q2 2023 than in its first-quarter call.

However, several significant authorities have been concerned about the possible problems associated with AI for some time. For instance, in 2017, the Banking Stability Board (FSB) expressed worries regarding the use of AI and machine learning in the banking sector.

In particular, the FSB noted that a few groups of major technology companies were increasingly providing AI and machine learning services. "There is the potential for natural monopolies or oligopolies," the FSB noted, adding that competition-related problems can result in threats to financial stability.

The authorities asserted at the time that "if one of them were to face major disruption or insolvency, there would be major repercussions in the world of finance."