Gary Gensler confirms SEC’s use of AI for financial surveillance

The United States Securities and Exchange Commission (SEC) is utilizing artificial intelligence (AI) technologies to monitor the financial sector for signs of fraud and manipulation, according to SEC Chair Gary Gensler in a recent Senate oversight hearing.

Background

In a July 17 speech before the National Press Club, Gensler highlighted the benefits of integrating AI technologies into the SEC's surveillance scheme. However, the agency's explicit use of AI hadn't been publicly disclosed until now.

Using AI for Market Surveillance

During the hearing, Gensler was asked by Sen. Catherine Cortez Masto to elaborate on how the SEC is using AI. Gensler responded, "So, we already do. In some market surveillance and enforcement actions. To look for patterns in the market. … It’s one of the reasons why we’ve asked Congress for greater funding this year, in 2024, to help build up our technology budget for the emerging technologies."

Keeping it under wraps

While it may not be surprising that the SEC is utilizing AI technologies, the agency has not officially declared its use. Unlike the requirement to report cybersecurity incidents, there are no legal obligations for U.S. agencies to publicly disclose their internal use of new technologies.

Form of AI used

The description provided by Gensler does not specify the exact form of AI being used by the SEC. However, the agency has filed several analysis reports on the use of AI and algorithmic trading in financial markets. It is likely that the SEC employs machine learning algorithms capable of analyzing large amounts of data for unusual patterns.