A.I. models may put companies’ interests ahead of investors’.
The meme stock frenzy driven by social media and the rise of retail trading on apps highlighted the power of nudges and predictive algorithms. But are companies that use A.I. to study investor behavior or recommend trades prioritizing user interests when they act on that information?
The S.E.C. last month proposed a rule that would require platforms to eliminate conflicts of interest in their technology. “You’re not supposed to put the adviser ahead of the investor, you’re not supposed to put the broker ahead of the investor,” Mr. Gensler said. “And so we put out a specific proposal about addressing those conflicts that could be embedded in the models.”
Who is responsible if generative A.I. gives faulty financial advice?
“Investment advisers under the law have a fiduciary duty, a duty of care, and a duty of loyalty to their clients,” Mr. Gensler said. “And whether you’re using an algorithm, you have that same duty of care.”
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