On September 12th, the Chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, testified in a Senate oversight hearing, shedding light on the agency’s use of Artificial Intelligence (AI) technology to monitor the financial sector for signs of fraud and manipulation.
Gensler had previously addressed the public on July 17th, outlining the incorporation of AI technology into the SEC’s surveillance plans. However, up to this point, the specifics of the agency’s AI use remained undisclosed.
When Senator Catherine Cortez Masto asked him to elaborate on how the SEC envisions using AI, Gensler replied, “We’ve already done it, to some extent, in market surveillance and enforcement actions. To search for patterns in the market. That’s one of the reasons we’ve asked Congress for more funding this year and into 2024, to help build budgets for emerging technologies.”
While it’s not surprising that the SEC is employing AI technologies as part of its regular operations, what’s surprising is the lack of an official, detailed public statement about it.
Notably, apart from the requirement for cybersecurity incident reporting signed into law by President Biden in March 2022, there don’t seem to be any legal mandates in the U.S. for agencies to publicly report their internal use of new technologies.
Based on Gensler’s description, it’s still not entirely clear which form of AI the agency is using. However, the SEC has submitted numerous reports analyzing the use of AI and algorithmic trading by market participants in the financial sector.
It would be reasonable to assume that the agency is employing similar machine learning algorithms with the ability to analyze vast amounts of information to detect anomalies.
In summary, Chairman Gensler’s testimony highlights the SEC’s use of AI for market surveillance, but the agency has yet to make an official public statement about the specifics of their AI implementation. This use of technology aligns with the broader trend of financial regulatory bodies harnessing AI to safeguard the integrity of financial markets.