Concerned about the growing and potentially unchecked use of artificial intelligence in the securities industry, Secretary of the Commonwealth William F. Galvin has directed his Securities Division to investigate the ways in which firms may be using the technology in their interactions with Massachusetts investors.

            Yesterday, Galvin’s Securities Division sent letters of inquiry to a number of registered and unregistered firms known to be using or developing the use of AI for business purposes in the securities industry. The letters seek information on the manner in which the entities may be using artificial intelligence in their business and activities.

            Of particular interest to Galvin are the supervisory procedures that firms have in place regarding artificial intelligence, and whether those systems ensure that the AI will not put the interests of the firm ahead of the interests of their clients. For those firms that have already deployed AI, the Division will also be evaluating the disclosure processes in place.

            “State securities regulators have an important role to play when it comes to AI and its impact on main street investors,” Galvin said today. “If deployed without the guardrails necessary to ensure proper disclosure and consideration of conflicts, I am concerned that this technology could result in harm to investors.” 

In addition to making inquiries relating to disclosure and supervisory procedures, the Securities Division is questioning select firms about any marketing materials provided to investors that may have been created using AI.

Firms included in the investigatory sweep have been given until August 16, 2023 to respond to the Division’s inquiries.