ACA Client Alert Highlights SEC Focus on AI use by Investment Advisers

ACA released a client alert highlighting the Securities and Exchange Commission’s (SEC) recent focus on the use of artificial intelligence by investment advisors. The Division of Examinations has initiated a sweep of investment advisers on how AI-based tools are being used by the firms including requests for information on “how firms are managing AI-related conflicts of interest, copies of marketing materials that mention AI, continuity plans around AI system failures, and other documents related to AI.” ACA notes that firms should be prepared to supply the SEC with documents pertaining to an inventory of AI-based tools used within the firm, policies and procedures the govern the use of AI within the firm, security controls to protect client data, sources and providers of data included in AI tools and models, and internal reports of incidents where AI use created regulatory, ethical, or legal issues, among other recommendations. The SEC is also concerned with “AI-washing” where firms overstate their AI capabilities in marketing materials. The client alert notes that the SEC is working to address these concerns “through this AI sweep to learn about how firms are using AI and the governance, risk management, and control framework they have in place.”

Click here to read the client alert from ACA on the SEC Division of Examination’s AI sweep.