Artificial Fears And Human Intelligence: Remarks At The SEC Roundtable On Artificial Intelligence In The Financial Industry, SEC Commissioner Hester M. Peirce, Washington D.C., March 27, 2025

Thank you to staff from DERA and from all over the building for organizing this roundtable and thank you to all the panelists today for their participation in what I expect will be an enlightening and productive discussion. As we know, the securities industry has a long history of embracing new technologies to achieve greater efficiencies and lower costs: ticker, telephone, terminal, and now artificial intelligence. I look forward to hearing from the panelists about their deployment of AI, the benefits enjoyed, and the risks encountered.

The increasing use of artificial intelligence in broader society has often been discussed in sensationalist terms. Proponents tout its potential to revolutionize whole industries and opponents warn of its potential to devastate the workforce. The increasing use of artificial intelligence in the financial industry has not been immune from such thinking, and, regrettably, the Commission fell victim to the sensationalism when it attempted to broadly and clumsily regulate the use of predictive data analytics by broker-dealers and investment advisers.[1]

I am, by no means, foreclosing the idea that the use of artificial intelligence in the financial industry could pose risks to investors or market participants, and the Commission may have a role in resolving any such issues. But the Commission should not get lost in artificial fears. It should base any action on a thorough understanding of the particular AI problem it is trying to solve and why a regulatory solution to that problem is warranted. Approaching it this way is less daunting than trying to design a grand regulatory solution to respond to imprecise AI fears. It is also consistent with how we regulate humans, who are far more wonderful, intriguing, and complex than AI and who also can cause trouble.

Speaking of human trouble, I asked someone yesterday how her 4-year-old twins were doing, and she responded that they are a marvel: they absorb everything they see and hear and amalgamate these inputs with their own experiences to come up with amazing and surprising outputs. Sounds like AI, only better. Every human truly is a wonder on her own, and together we can accomplish even more. We also can accomplish yet more by combining our intelligence with artificial intelligence. This powerful combination will bring some new problems into the world, but also will generate solutions to those problems.

Today’s roundtable is a great step toward a better understanding of artificial intelligence, its role in the financial industry, and how to think about regulating it. A better understanding can dispel unfounded fears and enable us to focus on real problems and to identify tailored solutions. To that end, I have several questions that the panelists may wish to consider:

• What areas of the securities industry are likely to be most transformed by AI in the next five years? Should we do anything as a regulator to prepare for these changes?
• Do firms need guidance from the Commission about their usage of artificial intelligence technology, and how should the Commission deliver such guidance?
• Given the rapid pace of technological evolution in this space, how do we ensure that any potential Commission guidance or regulations related to the use of artificial intelligence do not quickly become outdated?
• Relatedly, how do we ensure that our actions do not stifle innovation and remain technologically agnostic?
• Finally, how do we avoid overreacting to the most egregious cases of artificial intelligence misuse and letting it define our rules and guidance?[2]