Gensler warns about AI fraud and manipulation
Securities and Exchange Commission (SEC) Chair Gary Gensler recently discussed the potential risks associated with artificial intelligence (AI) during a virtual fireside chat. Gensler highlighted the concept of “AI washing,” where companies make false claims about their new technology models. He emphasized the importance of issuers being truthful in their filings and disclosing any risks associated with new technologies. Gensler also expressed concerns about AI being used to manipulate markets and deceive the public, stating that fraud is still against the law. He cited examples of fake news posts and system hacks that were attributed to AI.
Concerns about algorithm bias and narrowcasting
Gensler further discussed the issue of algorithm bias, where AI systems can reflect societal biases. He gave examples of how AI algorithms can influence decisions related to job applications and home financing, which may result in discriminatory outcomes. Gensler acknowledged that explaining the final decisions made by AI algorithms can be challenging due to complex mathematical calculations. However, he believes that humans, as creators of these algorithms, have a responsibility to understand and address any biases present. Gensler suggested that this issue will likely be resolved over time, possibly through legal interventions.
Centralized AI poses risks for the financial sector
Gensler expressed his overall positive view of AI’s potential benefits for society and financial markets. However, he cautioned against the centralization of AI, as it could lead to a few large models and data aggregators dominating the industry. This concentration of power could create a “monoculture” where many financial actors rely on a single central data or AI model. Gensler emphasized that financial regulators currently lack oversight over these central nodes, posing risks to both society and the financial sector at large. He pledged to raise awareness among international colleagues about these challenges and their impact on traditional financial systems.
Hot Take: AI’s impact on financial systems
Gary Gensler, the SEC Chair, has once again raised concerns about the potential risks associated with artificial intelligence (AI) in financial systems. He warned against AI washing, fraud, algorithm bias, and narrowcasting. Gensler highlighted the need for truthfulness and transparency when it comes to new technology models and their risks. He also stressed the responsibility of humans in understanding and addressing biases present in AI algorithms. Additionally, Gensler expressed concerns about the centralization of AI and its potential negative impact on the financial sector. Despite acknowledging AI’s positive contributions, he emphasized the importance of raising awareness and taking appropriate measures to mitigate risks.
By
By
By
By