Congressional Report Details Use of AI Technologies in Capital Markets | Orrick, Herrington & Sutcliffe LLP

On September 15, the Congressional Research Service published a significant report examining the role of AI tools in capital markets. It outlines critical issues Congress should address when creating legislation. The report identifies common AI applications, including investment management, robo-advisers for client support, regulatory compliance for anti-money laundering, and back-office productivity enhancements. While acknowledging potential benefits, it also raises policy concerns such as the necessity for auditable financial models, accountability for AI failures, risks of market concentration, and the imperative to ensure data availability and security. The report warns of risks like fraud, market manipulation, and cyberattacks associated with AI. Additionally, it discusses the financial burdens of AI adoption, including initial investments and ongoing costs. Lastly, the report highlights the SEC’s newly established AI task force, aimed at promoting innovation in regulatory practices. This underscores the importance of effective oversight as AI continues to reshape the financial landscape.

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