AI Technologies in Action

During a recent Senate oversight hearing on September 12, SEC Chair Gary Gensler revealed that the commission is actively employing artificial intelligence tools to enhance its monitoring of the financial sector. Aimed at detecting fraudulent behavior and market manipulation, AI is stepping up its game in this high-stakes environment.

The Road to AI Integration

In a previous address to the National Press Club on July 17, Gensler illuminated the thought process behind integrating such advanced technologies into the SEC’s surveillance mechanisms. What once lurked in the shadows of corporate meetings is now stepping into the light—though not as publicly as some may have expected.

What’s the Plan, Gensler?

When Senator Catherine Cortez Masto directly asked about the SEC’s AI usage, Gensler confirmed it was already happening. He emphasized, “We already do. In some market surveillance and enforcement actions. To look for patterns in the market.” This transparency perhaps raises as many eyebrows as it calms, as many wonder just how deep this AI implementation goes.

The Budgetary Blues

Part of the reasoning behind this increasing reliance on AI technologies stemmed from the SEC’s appeal for a broadened budget in 2024. Gensler pointed to the urgent need for more funding to boost the technology budget, particularly for embracing the wide array of emerging technologies that can aid in better market oversight.

The Missing Declaration

Surprisingly, the SEC hasn’t put out a formal announcement concerning its adoption of AI technologies. It’s akin to finding out your neighbor throws a wild garden party every Friday but never actually invites you—intriguing yet frustratingly vague. One possible explanation is the absence of legal obligations for agencies to disclose such internal technological implementations, aside from some obligatory cybersecurity incident reports mandated after President Biden’s 2022 directive.

AI’s Role in Financial Analysis

While the specifics of the SEC’s AI tools remain cloudy, Gensler hinted at the use of machine learning algorithms. Think of these algorithms as digital detectives sifting through mountains of market data to sniff out something amiss. With algorithmic trading on the rise, this move seems both timely and vital.