Gary Gensler is raising concerns about artificial intelligence warning that it could significantly affect the financial markets.
Gary Gensler is raising concerns about artificial intelligence warning that it could significantly affect the financial markets.
U.S. Securities and Exchange Commission (SEC) chair Gary Gensler is sounding the alarm on the transformative impact of artificial intelligence (AI), saying that it may have wide-ranging impacts on the financial markets.
Reflecting on a paper he co-authored in 2020 on deep learning and financial stability, Gensler expressed a concern that only a handful of companies might build the core models foundational to the technology many businesses — and the U.S. — will adopt.
That concentration, Gensler said, will “be the center of future crises, future financial crises.”
U.S. reliance on just a handful of foundational models is going to cause a “herding” effect where businesses and investors rely on the same model or dataset, the SEC chair said, according to the New York Times. This will lead to uniform reactions, deepening the interconnectedness of the economy which could make a broader crash more likely.
Gensler is also flagging whether AI tools on trading apps like Robinhood Markets Inc (NASDAQ:HOOD) which analyze investor behaviors actually prioritize the investor, or if something more nefarious is in the works.
“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 said, pointing to the potential pitfalls lurking in AI models.
If an AI chatbot gives flawed financial advice, who’s to blame? Gensler is firm in his stance. The duty of care and loyalty rests with investment advisers, regardless of whether they use algorithms. The debate on the legal liability of AI is far from settled, but Gensler believes companies should establish fail-safe mechanisms.
He emphasized, as reported by The New York Times, that while chatbots like OpenAI’s ChatGPT may seem autonomous, there are humans behind the design, parameters, and operations. Hence, responsibility cannot be offloaded solely onto the tech.
Produced in association with Benzinga
