The chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has expressed concerns about the potential risks posed by artificial intelligence (AI) in the financial sector, according to a report by Business Insider, citing Dealbook.
In a recent interview with Dealbook, Gensler reiterated his previous statements on the topic of AI and financial stability, as explored in a 2020 paper he co-authored on deep learning and economic stability.
He warned that the rapid advancement of technology could lead to greater interconnectedness and uniformity in financial systems, making them harder to regulate.
Gensler specifically stated, “This technology will be the center of future financial crises,” highlighting the economics of scale and networks that AI brings.
The SEC chairman further explained that a small number of AI companies will dominate the tools relied upon by businesses and finance.
He also emphasized that the more centralized the system becomes, the greater the dependence on the same information, increasing the likelihood of a crash. Similar statements were made by Gensler in July.
Gensler recognized the transformative power of AI but warned that it could promote herd behavior and encourage a lack of diversity among investors.
Furthermore, he pointed out that AI models may prioritize the interests of companies over those of investors.
In response to these concerns, the SEC proposed a rule in July aimed at preventing conflicts of interest between companies and investors.
Gensler stressed that investment advisers, whether using algorithms or not, have a fiduciary duty to their clients and should prioritize their clients’ interests.