Treasury to issue report on 'best practices' for Wall Street to manage AI

President Joe Biden signed an executive order to increase oversight of artificial intelligence, citing the economic, national security and other risks it poses to society.

"One thing is clear: to realize the promise of AI and avoid the risk, we need to govern this technology," Biden said in a speech announcing the executive order on Oct. 30.

The order requires companies "developing any (AI) foundation model that poses a serious risk to national security, national economic security, or national public health and safety" to notify the government of their work and share any safety test results, according to a White House fact sheet.

It also directs the Secretary of the Treasury to issue a report on the "best practices for financial institutions to manage AI-specific cybersecurity risks" within 150 days, the order states.

Another part of the order states that independent regulatory agencies are "encouraged" to consider using their authorities and rule-making capabilities to protect consumers from the risks of AI, including fraud, discrimination and risks to financial stability.

In July, the SEC issued a rule proposal that would require investment advisers and broker-dealers to "eliminate or neutralize" conflicts of interest in investor interactions involving the use of certain technologies, including AI.

However, multiple trade associations — including the Investment Company Institute, Managed Funds Association and Investment Adviser Association — have said the proposal goes too far and called for its withdrawal, with concerns the proposal could stifle the use of technology and harm the markets.

In an email, ICI spokesperson Stephen Bradford said the organization is "analyzing" the president's executive order and "continuing to discuss the issue with (its) members."

"AI will play an important role in our industry — but just how significant remains to be seen," Bradford added. "We know that AI will impact entire organizations, from creating operational efficiency in the back office to augmenting data analysis in portfolio management."

In his Oct. 30 speech, President Biden said that while the "executive order represents bold action," there is still a need for congressional action as well. The president said he planned to meet with Senate Majority Leader Chuck Schumer, D-N.Y., and a bipartisan group of lawmakers at the White House Oct. 31 to discuss the need for legislation on AI.