Financial Regulators Face Criticism Over Proposed AI Rules


  • Financial regulators facing heat for proposed AI rules; critics say they could hinder innovation and burden industry.
  • SEC’s PDA proposal criticized for vague definitions, potential retroactive liability, and impractical requirements.
  • Calls for SEC to withdraw proposal, engage industry for more collaborative approach, like CFTC.

Financial regulators are under scrutiny for handling proposed rules regarding using artificial intelligence (AI) in investment advising and brokerage. The Securities and Exchange Commission (SEC) is facing backlash for its Conflicts of Interest Associated with the Use of Predictive Data Analytics (PDA) proposal, with critics arguing that it could stifle innovation and impose undue burdens on industry players.

Controversial SEC AI proposal draws criticism

The SEC’s PDA proposal has sparked controversy among lawmakers and industry stakeholders. Critics argue that the proposal’s broad definition of covered technologies, which includes everything from advanced machine learning algorithms to basic Excel spreadsheets, is overly restrictive and fails to account for the rapid pace of technological advancement.

Opponents of the PDA proposal, including Senators Ted Cruz and Bill Hagerty, have raised concerns about the potential for retroactive liability and subjective enforcement. They argue that the proposal’s requirement for investment advisers to inventory and assess their use of covered technology is impractical and could lead to arbitrary penalties.

Calls for withdrawal and industry engagement

Amid mounting criticism, some call on the SEC to withdraw the PDA proposal and engage in a more collaborative approach with industry stakeholders. The Commodity Futures Trading Commission (CFTC) has been cited as an example of a regulator taking a more proactive and open-minded approach to regulating AI in financial markets.

As the financial industry undergoes rapid technological transformation, regulators face balancing innovation with consumer protection. The SEC’s PDA proposal has drawn criticism for its perceived overreach and lack of flexibility in adapting to evolving technologies. Critics argue that a more collaborative approach, similar to that of the CFTC, is needed to ensure that regulatory frameworks keep pace with technological advancements without stifling innovation.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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James Kinoti

A crypto enthusiast, James finds pleasure in sharing knowledge on fintech, cryptocurrency as well as blockchain and frontier technologies. The latest innovations in the crypto industry, crypto gaming, AI, blockchain technology, and other technologies are his preoccupation. His mission: be on track with transformative applications in various industries.

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