The SEC’s chairman, Gary Gensler, has expressed concerns to the Financial Times regarding the accelerated adoption of Artificial Intelligence (AI) in the financial sector, suggesting that unchecked AI could potentially ignite a financial meltdown.
Gensler shared his belief that, by the late 2020s or early 2030s, the financial industry’s growing dependence on AI-driven models crafted by tech giants might precipitate economic turbulence. “There’s a foreseeable scenario where our financial landscape faces upheaval, with post-analysis pointing towards an over-reliance on a particular AI model or data aggregator. It could stem from anywhere – mortgages, equities; the source is unpredictable,” he commented.
The SEC chair emphasized the pressing need for comprehensive regulations that scrutinize the foundational AI architectures designed by tech enterprises and their subsequent implementations within Wall Street firms. He characterized this regulatory endeavor as spanning multiple sectors and domains. “Historically, our regulations focus on individual entities – specific banks, brokers, or funds. However, this challenge demands we broaden our gaze to recognize the shared reliance across institutions on singular AI models or data sources,” Gensler elaborated.
The financial world has warmly embraced transformative AI capabilities, especially after the debut of ChatGPT. Just recently, Morgan Stanley integrated an AI-driven assistant, powered by OpenAI’s GPT4, to expedite market data retrieval for its staff. Concurrently, there’s a buzz around JPMorgan’s new AI innovation, ‘IndexGPT’, which aims to guide traders in their security selection processes.
Yet, there’s a duality in Wall Street’s approach. While firms eagerly harness AI’s potential, they remain cautious. Notably, heavyweight institutions like Goldman Sachs, Deutsche Bank, and Bank of America have prohibited the use of ChatGPT within their operational environments this year.
The SEC, when contacted by Insider for a statement, was yet to respond as of the last update.