On June 14, the U.S. Senate Committee on Homeland Security and Governmental Affairs released a
report on the use of artificial intelligence (AI) by hedge funds to inform trading decisions. The report suggested that the increased use and reliance upon AI in the financial services sector could lead to greater risks to financial investors and markets. On par with these findings included, for instance, an observation that hedge funds and regulators may use inconsistent or unclear terms to define AI systems that could make it difficult to understand what types of systems are in use and how existing and proposed regulations could apply. The report also suggested this may complicate efforts to audit and assess hedge funds’ review processes and human moderation efforts. The report also suggested that the use of AI for trading purposes could amplify traditional investment industry risks.
The Committee made several recommendations, including calling upon regulators to consider potential gaps in existing and proposed regulatory frameworks. The report concluded that Congress and regulators should seek to improve the public’s understanding of AI and establish guardrails to address risks related to the use of this technology in the financial services sector.
