The obvious first issues that the SEC should be concerned about, as GAI advances, are that businesses do not lie about either their use of AI or how they protect themselves from being harmed by third party GAI. In fact, the SEC seems interested in far more.

The SEC today released the text of remarks by Chair Gary Gensler.  Aside from being an advocate for strong SEC regulation, Gensler was a professor at MIT, and his speech to the National Press Club ranges from Isaac Newton and the bubonic plague to the following litany of regulatory concerns:

• Advisers and brokers will rely on GAI to make investment recommendations.  Will the AI they use be set up to maximize return to the user (the broker, let us say) or to maximize return to and protection of the investor?
• GAI builds its conclusion based on masses of data gathered from multiple sources, including huge amounts of data from every individual; who owns that data, and thus the intelligence culled from its manipulation?  [Query why this is SEC mandate?]
• “Bad actors” can use GAI to manipulate capital markets, to spook the public, to influence elections. [Some of that seems the bailiwick of the Federal Elections Commission]
• “For the SEC, the challenge here is to promote competitive, efficient markets in the face of what could be dominant base layers at the center of the capital markets.”  This follows the query about who owns the data culled to enhance AI operation.  Is he asking whether we will have honest markets if everyone uses the same GAI based on the same base layer of information?  [This is an SEC issue?]
• “AI may heighten financial fragility” if a “herd of individual actors” make similar decisions “because they are getting the same signal from a base model or data aggregator,” which in turn could “play a central role in the after-action reports of a a future financial crisis.”

Seems to me that the SEC better start hoping that people as smart as Isaac Newton start applying for jobs, rather than the young people coming out of law school looking for an entry level foot-hold in the legal or business community.  And can you imagine the reaction of the minority Republican Commissioners, already deeply troubled by Gensler’s broad view of SEC regulatory purview?