SEC Chair Gary Gensler has confirmed the agency's use of artificial intelligence (AI) technologies for market surveillance and enforcement actions to identify patterns and potential signs of fraud. While the SEC's integration of AI into its surveillance efforts had been previously discussed, this public confirmation underscores the agency's commitment to leveraging emerging technologies for regulatory purposes.
During a Senate oversight hearing, Gary Gensler, Chair of the United States Securities and Exchange Commission (SEC), disclosed that the agency is actively utilizing artificial intelligence (AI) technologies for monitoring the financial sector. This AI-powered surveillance aims to identify patterns and potential instances of fraud and manipulation in financial markets.
Responding to a question from Sen. Catherine Cortez Masto about the SEC's utilization of AI, Gensler stated that the agency is already employing AI in some aspects of market surveillance and enforcement actions. He emphasized that AI helps in analyzing market data to detect unusual or suspicious activities. Additionally, he highlighted the agency's request for increased funding to bolster its technology budget for emerging technologies in 2024.
While the SEC's use of AI in its regulatory activities was previously discussed by Gensler in a public speech in July, this hearing provided an official confirmation of the agency's AI integration. Notably, the SEC had not issued a formal, public declaration regarding its adoption of AI technologies, highlighting the agency's focus on implementing advanced tools without extensive public announcements.
The specific AI techniques and algorithms employed by the SEC were not detailed during the hearing. However, the agency has previously published reports and analyses on the use of AI and algorithmic trading in financial markets. Given Gensler's comments on detecting patterns and anomalies, it is likely that machine learning algorithms play a crucial role in the SEC's surveillance efforts.
The SEC's commitment to leveraging AI for market surveillance aligns with the broader adoption of technology and data analytics in the financial regulatory landscape. By utilizing AI, the SEC aims to enhance its capabilities in monitoring and maintaining the integrity of financial markets, ultimately contributing to investor protection and market stability.
(TRISTAN GREENE, CoinTelegraph, 2023)