Securities and Exchange Commission (SEC) Chairman Gary Gensler warned that artificial intelligence (AI) will play a major role in upcoming financial crises, The New York Times reported on Monday.
As a few dominant AI models emerge in the United States, masses of Americans could make the same financial decisions due to receiving identical information from them, Gensler told the NYT. As a result, Gensler warned about the significance of “herding” when it comes to AI-related financial crises in the future.
“This technology will be the center of future crises, future financial crises,” he told the NYT. “It has to do with this powerful set of economics around scale and networks.” (RELATED: ‘Massive Economic Implications’: Tech Titan Launches Digital Currency Featuring Global ID)
WASHINGTON – JULY 01: Chairman of Commodity Futures Trading commission Gary Gensler testifies during the second day of a hearing before the Financial Crisis Inquiry Commission July 1, 2010 on Capitol Hill in Washington, DC. (Photo by Alex Wong/Getty Images)
AI models may seek to benefit companies and financial advisers over investors, which is a potential issue, Gensler explained, according to the NYT.
“You’re not supposed to put the adviser ahead of the investor, you’re not supposed to put the broker ahead of the investor,” Gensler told the NYT. The SEC released a proposal in late July to address the potential conflicts programmed in AI models, he added.
Humans are legally responsible for giving their clients the best advice, even when AI is involved, Gensler stated.
“Investment advisers under the law have a fiduciary duty, a duty of care, and a duty of loyalty to their clients,” Gensler told the NYT. “And whether you’re using an algorithm, you have that same duty of care.”
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