Federal Bill Pushes for AI ‘Experiments’ at SEC

Last week, a bill that would permit the Securities and Exchange Commission and six other financial regulatory agencies to run experimental projects using artificial intelligence without “burdensome regulation” was introduced to the U.S. Senate Committee on Banking and the House Financial Services Committee.

The bill was introduced by Republicans and co-sponsored by Democrats in both houses and would allow the agencies to name a division or department as an “AI Innovation Lab” to conduct test projects without “unnecessary” regulation or “expectation of enforcement actions.”

Senator Mike Rounds, R-South Dakota, introduced the Senate version of the Unleashing AI Innovation in Financial Services Act at a Wednesday hearing, and the House version was introduced by the chair of the House Committee on Financial Services, Representative French Hill, R-Arkansas.

In addition to the SEC, the initiative would also involve the board of governors of the Federal Reserve System; the Federal Deposit Insurance Corp.; the Office of the Comptroller of the Currency; the Consumer Financial Protection Bureau; the National Credit Union Administration; and the Federal Housing Finance Agency.

The bills echo President Donald Trump’s directives on AI released last month that call for a “dynamic, ‘try-first’ culture for AI” and “regulatory sandboxes” to allow organizations to conduct rapid testing with minimal restrictions.

Last week, at the Senate Committee on Banking hearing, “Guardrails and Growth: AI’s Role in Capital and Insurance Markets,” Tal Cohen, president of Nasdaq, said that he supported regulatory sandboxes for AI development, rather than increased regulation, adding, “Many of the top concerns about AI can be addressed by existing laws.”

However, when Senator Mark Warner, D-Virginia, a ranking member of the Senate committee, asked Cohen whether there was a “public-private entity that is made up right now” setting AI guardrails in stock exchanges, Cohen answered, “No. We need one. We need to have that discussion.”

David Cox, vice president for AI models at IBM Research, told the Senate that the use of AI should be regulated, rather than the technology at large.

“An AI model used to auto-summarize SEC filings should be governed differently than one used for autonomous financial trading,” Cox said.

When Rounds introduced the Senate bill, he criticized former SEC Chairman Gary Gensler’s approach to AI, including a rejected 2023 rule that would have required advisers and broker/dealers to eliminate conflicts of interest arising from their use of AI. Gensler had expressed concerns about misleading claims of AI use, but critics said Gensler’s rule would have been too broadly restrictive.

A survey released in June by consulting and research firm F2 Strategy found that registered investment advisers are an overwhelming majority of AI users at wealth management firms. AI was used by 74% of surveyed firms, up from 51% in 2023, and 78% of AI users were registered investment advisers, hybrid RIAs and multi-family offices.

Surveyed wealth managers told F2 Strategy they used AI for tasks like note-taking and meeting prep; automatic compliance review; data extraction and document review; coding assistance; and financial planning, including estates and taxes.