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Abstract: 

Artificial Intelligence (“AI”) has become a formidable ally to the financial services industry by fundamentally altering operations and creating efficiencies across various functions. As financial institutions increasingly integrate AI into their business models, heightened expectations for transparency and accountability have raised concerns among U.S. regulators, who, while acknowledging AI’s advantages, have raised concerns about the potential for systemic risk. The SEC and CFTC, for example, are examining existing law and guidance for their applicability to the unique challenges posed by AI and weighing the need for specific regulations targeted at the technology. This article explores how AI has empowered financial institutions to enhance their performance and competitiveness, while also examining best practices for navigating the evolving landscape of regulatory oversight.

Keywords: Supervised and Unsupervised Machine Learning; Reinforcement Machine Learning; Use of AI in Client Service; Use in Capital Markets; Algorithmic Trading; Managing Regulatory Risk; Risks of AI

Affiliations:  1: Baker & Hostetler LLP; 2: Baker & Hostetler LLP; 3: Baker & Hostetler LLP.