January 17, 2024 - Last week, Patrick McHenry (R. NC), the Chairman of the House Financial Services Committee (GFSC) and Maxine Waters (D. CA), the HFSC’s Ranking Member, announced the formation of a bipartisan working group on artificial intelligence (AI). The HFSC’s press release notes that the “bipartisan AI Working Group will explore how artificial intelligence (AI) is impacting the financial services and housing industries, including the development of new products and services, fraud prevention, compliance efficiency, and the enhancement of supervisory and regulatory tools, as well as how AI may impact the financial services workforce. The Working Group will also examine how existing regulation addresses the use of AI and how lawmakers can ensure that any new regulations consider both the potential benefits and risks associated with AI. This Working Group is a continuation of the work conducted by the Task Force on Artificial Intelligence in the 116th and 117th Congresses.”
The Working Group was created in response to President Biden’s October 2023 Executive Order on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence to ensure that America leads the way in seizing the promise and managing the risks of AI. As the press release further notes, “The Bipartisan Working Group on AI will serve as a forum to examine the directives from the Executive Order related to the Committee’s jurisdiction.”
The HFSC’s bipartisan approach to understanding AI stands in sharp contrast to that taken by the SEC as represented by the publication of its broad 239-page Conflicts of Interest Associated with the Use of Predicative Data Analytics by Broker-Dealers and Investment Advisers proposed rule(the PDA Rule), which we have noted appears unworkable, was not vetted with financial services professionals, is based entirely on conjecture and is likely not authorized by statutory authority.
The Working Group is headed by French Hill (R. AR) and Stephen Lynch (D. MA). The LSTA’s looks forward to working closely with the Working Group as it explores how AI is likely to impact the financial services industry, how existing regulation addresses the use of AI and to ensure that new regulations consider the costs, benefits and risks associated with AI.