Partner Carolyn Welshhans joined a podcast from Oyster Consulting to discuss the legal and regulatory considerations financial firms must keep in mind when using AI, focusing on compliance with US Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority rules and highlighting the importance of transparency, proper disclosure to clients, data privacy, and cybersecurity.
“The SEC is going to care most about what our clients are being told about the use, the risks, et cetera, of AI, and does that match what is actually happening,” Carolyn said. “And we’ve seen some of these types of cases brought by the SEC already. They’ve been referred to as AI-washing cases, and that’s where the SEC alleges that there’s a big disparity between what is being told to clients versus what is actually being done with AI, and the SEC alleges not much, if anything at all, is being done with the AI.”