The SEC wants to know how firms monitor AI usage (Board IQ)

The SEC has raised concerns that the use of AI systems at firms is outrunning its compliance oversight. The upcoming exam priorities agenda of the SEC will likely include reviewing firms’ AI governance and whether it is sufficient to keep guardrails on the use of AI for its intended purpose. Representatives from the SEC’s Division of Examinations have stated that it intends to review the controls and processes a firm has implemented around AI and understand what analysis is being done to ensure AI systems meet firm policies. CCOs are now scrambling to raise red flags about the use of AI at their firms beyond the scope of their current policies and procedures. In some instances, AI has been utilized to create summaries of compliance meetings or board reporting without human intervention to correct mistakes and inaccurate information. The SEC has also warned compliance professionals about using AI for fund disclosures, and that errors need to be identified and corrected while sensitive information needs to be protected. The SEC wants firms and their CCOs to be continuously aware of the risks AI presents when it comes to privacy concerns, consent issues and accuracy. See Board IQ (free trial, then subscription required), “Using AI? Your CCO Might Be Worried, and So Is the SEC”