William Galvin, Massachusettsโ top securities regulator sent JPMorgan, Morgan Stanley, Tradier Brokerage, US Tiger Securities, E-Trade, Savvy Advisors & Hearsay Systems a letter asking how they use AI
Do they ensure that the AI will not put the interests of the firm ahead of their clients?
Sources: https://www.investmentnews.com/galvin-launches-investigation-into-brokers-use-of-ai-240703
TLDRS:
- The state of Massachusetts is concerned about what it calls a growing and potentially unchecked use of artificial intelligence in the securities industry.
The investigation came a week after the U.S. Securities and Exchange Commission proposed requiring broker-dealers to eliminate possible conflicts of interest from the use of artificial intelligence on trading platforms.
- The SEC's proposal, which now faces a period of public comment prior to any decision on whether to adopt it, was in part inspired by 2021's "meme stock" frenzy, in which SEC officials say predictive analytics helped drive the "gamification" of retail investors' behavior.
- On Wednesday, Secretary of the Commonwealth William Galvin announced that his securities division would launch an investigation into how firms are using AI to engage with Massachusetts investors. The office has sent letters to six companies โ JPMorgan Chase, Morgan Stanley, Tradier Brokerage, US Tiger Securities (the U.S. broker-dealer division of Tiger Brokers), Savvy Advisors and Hearsay Systems โ seeking information on how they are using AI in their business activities. ETrade, which is owned by Morgan Stanley, also received a letter.
- Of particular concern is the supervision firms have in place over AI engines to ensure the technology is not putting the firmโs interests ahead of clientsโ interests, Galvin said in a statement.
