By Huw Jones
LONDON (Reuters) – Banks and investment firms in the European Union cannot escape their board responsibility and legal obligation to protect clients when using artificial intelligence (AI), the bloc’s securities watchdog said in its first statement on AI.
The European Securities and Markets Authority (ESMA) on Thursday set out how regulated financial firms in the 27-nation bloc can use AI in daily operations without falling foul of the EU’s MiFID securities law.
While AI holds promise in improving investment strategies and client services, it also presents inherent risks, and the potential impact on protecting retail investors is likely to be significant, ESMA said.
“It is important to emphasize that company decisions remain the responsibility of management bodies, regardless of whether these decisions are made by people or by AI-based tools,” stated ESMA.
“Central to the use of AI in investment services is an unwavering commitment to acting in the best interests of clients, an overarching requirement that applies regardless of the tools the firm decides to adopt in providing services.”
The statement covers not only cases where AI tools are developed or adopted by the bank or investment firm itself, but also the use of third-party AI technologies such as ChatGPT and Google Bard, with or without the direct knowledge and approval of senior management. , said ESMA.
“The company’s governing body must have an adequate understanding of how AI technologies are applied and used in its company and must ensure appropriate oversight of these technologies,” ESMA said.
The statement focuses on MiFID compliance and is separate from the landmark EU rules on AI that come into force next month, setting a potential global benchmark for a technology used in business and everyday life.
Efforts are also underway globally by Group of Seven (G7) economies to implement protective barriers to safely develop rapidly evolving technology.
(Reporting by Huw Jones; Editing by Sharon Singleton)
