SEC Official Envisions AI Modernizing Adviser-Investor Communications
On February 3, the SEC Director of the Division of Investment Management, Brian Daly, addressed the evolving role of AI in investment management. He highlighted both the challenges and opportunities that artificial intelligence presents for investment advisers, investment companies, and their clients.
Current Challenges in AI Adoption
Daly noted that liability concerns are a significant factor slowing the adoption of AI technologies in the investment management sector. However, he emphasized that these challenges “should not be insurmountable.” The industry has historically navigated technology-driven changes effectively, including the integration of algorithmic and quantitative models while balancing regulatory compliance and common disclosures.
Encouraging Engagement with the SEC
Recognizing the unique challenges presented by AI, Daly urged investment companies and advisers to actively engage with the SEC about innovative technologies. He highlighted the potential for AI-driven solutions to enhance investor disclosure delivery functionality.
Reimagining Disclosure Delivery
Daly proposed rethinking how disclosures are delivered by leveraging large language models. This approach enables retail investors to interact with AI agents that are trained on fund documents, providing them with clear, plain-English answers to their inquiries.
Regulatory and Liability Considerations
Despite the promising outlook, Daly acknowledged that regulatory and liability questions remain a concern. Key issues include the supervision and classification of these AI tools under existing regulations. Nonetheless, he maintained that these challenges can be addressed through collaboration and thoughtful guidance.
Invitation for Industry Participation
Daly extended an invitation to industry participants to share their innovative ideas and to seek pilot programs or no-action letters. He reaffirmed the SEC’s commitment to listening to and considering all proposals presented.
In summary, the SEC is looking to the future, where AI can play a transformative role in enhancing communication between advisers and investors, while also navigating the regulatory landscape effectively.
