SEC Chair Reveals AI Deployment in Financial Oversight

SEC Chair Gary Gensler Reveals AI Deployment in Financial Oversight

Written by Gile K.,

Market Sentiment Analyst

Last Updated: September 13, 2023

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SEC taps artificial intelligence for the surveillance of the financial sector.

In a recent Senate oversight hearing, Gary Gensler, the US Securities and Exchange Commission (SEC) Chairman, confirmed that the regulatory body has been harnessing the capabilities of artificial intelligence (AI) to scrutinize financial activities for signs of fraud or market manipulation.

Gensler had previously alluded to the potential for AI technology in financial surveillance during a speech at the National Press Club on July 17th.

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However, until his recent Senate testimony, the SEC had not formally disclosed its active utilization of AI technologies. In response to a question from Sen. Catherine Cortez Masto about the SEC's vision for AI, Gensler stated:

So, we already do. In some market surveillance and enforcement actions. To look for patterns in the market... It’s one of the reasons why we’ve asked Congress for greater funding this year, in 2024, to help build up our technology budget for the emerging technologies.

Although the SEC's move to incorporate AI into its operations isn't entirely unexpected, it is notable that the agency had not made an official public announcement about its use of this technology. It is worth noting that current US laws don't mandate agencies to disclose the adoption of new internal technologies.

While Gensler's comments were not specific about the type of AI being used, the SEC has been proactive in analyzing AI and algorithmic trading in the financial sector through various reports. This could suggest that the SEC is likely leveraging machine learning algorithms to sift through data for irregularities.

Previously, Gensler shared his prepared testimony revealing that the SEC Chair is set to maintain the agency's position regarding crypto regulations.

The confirmation of AI's role in the SEC's financial oversight process opens up a new chapter in regulatory technology. While the specific form of AI being used remains unclear, what is evident is the SEC’s commitment to harnessing emerging technologies to enhance market integrity. As such, this could be the beginning of a more tech-savvy regulatory environment in the financial sector.