Republican senators try to outlaw rules that restrict Wall Street’s use of AI

Everyone should be free to trust AI to make their financial decisions, without knowing if it's also used against them

Republican senators are attempting to block the US Securities and Exchange Commission's proposal to restrict financial investment firms' use of AI.

On Tuesday, senators Ted Cruz (R-TX) and Bill Hagerty (R-TN) introduced the Protecting Innovation in Investment Act, which would prohibit the SEC's rule preventing advisers and brokers from deploying "data analytics, artificial intelligence, machine learning, and similar technologies" in scenarios where there could be a conflict of interest with investors.

SEC chair Gary Gensler previously warned that the latest software tools could allow financial firms to figure out optimal terms and conditions for themselves in negotiations against investors – potentially placing their own interests above others. Cruz and Hagerty, however, believe that preventing the use of AI will hurt investors and prevent them from utilizing the technology to their own benefit.

"New technologies over the last decade have allowed more Americans to access the stock market than ever before," Cruz intoned in a statement. "By waging a war on technology, the SEC would hurt the very investors that it claims to be protecting – Americans saving for retirement. Our bill will halt this crusade in its tracks by making sure this rule never sees the light of day."

The Commission proposed changes that would expand the regulatory remit of preexisting laws – under the Securities Exchange Act and the Investment Advisers Act – last year.

"Specifically, we propose that firms should be required to identify and eliminate, or neutralize the effect of, certain conflicts of interest associated with their use of [predictive data analytics]-like technologies because the effects of these conflicts of interest are contrary to the public interest and the protection of investors," the org explained in the proposed action [PDF].

The SEC also wants broker-dealers and investment advisers to retain records outlining a list of technologies they have implemented and how they are used to prove there's no conflict of interest. But the senators believe this would pose an "enormous" – if not "impossible" – burden, preventing Wall Street and others from deploying new technologies in financial applications.

The elected representatives also criticized the language behind the Commission's rules for being too loose, and suggested that "predictive analytics" could even mean something as simple as spreadsheets. Senator Hagerty criticized the SEC's proposed rules and argued it was an attempt to overregulate financial markets.

"The agency should demonstrate the ability to securely manage its own technology before seeking to micromanage and hinder innovative technologies at private firms," he concluded.

The Register has asked the SEC for comment. ®

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