Congressional Democrats are pressing the Securities and Exchange Commission on whether broker-dealers remain responsible for investment advice and trade execution when retail investors use artificial intelligence agents to manage their brokerage accounts.\u00a0<\/p>\n
The tools are \u201cbecoming rapidly accessible to everyone,\u201d Rep. Bill Foster (D-Ill.) and ranking member of a House subcommittee on Financial Institutions warned at a Capitol Hill hearing on Thursday.\u00a0<\/p>\n
\u201cThe legal liability is one of the things that we really need to get moving on,\u201d he added.\u00a0\u00a0<\/p>\n
Seven Democratic lawmakers, including Foster, on June 23 sent a letter to SEC Chairman Paul S. Atkins and asked whether the agency has consulted with broker-dealers about their use of AI agents and whether it is developing guidance for deploying the technology.\u00a0<\/p>\n
\u201cIt is essential that this technology be delivered in a manner that preserves the protections investors expect in regulated financial markets, and not as a tool to conceal conflicts of interest, evade broker-dealer responsibilities, manipulate markets, or provide unsound investment advice,\u201d lawmakers wrote. They set a July 31 deadline for Atkins to respond to their questions.<\/p>\n
The push comes as myriad broker-dealers, including Robinhood Markets<\/a>, promote the ability for individual investors to add AI agents to their brokerage accounts. Public advertises<\/a> that investors can instruct agents to implement covered call strategies or same-day options trades tied to intra-day moves in the S&P 500 index.\u00a0<\/p>\n UBS Wealth Management USA is hiring for an AI product manager that will include \u201cchatbots as well as agentic solutions\u201d with the \u201cgoal of \u2018codifying investment advice\u2019 for our advisors and saving them time,\u201d according to a job posting<\/a>.\u00a0<\/p>\n In their letter, the lawmakers also asked if the SEC has recommended \u201cguardrails\u201d for brokerage platforms using agentic trading and if the developers of the tools are liable for the operations that the AI agents carry out for retail investors.\u00a0<\/p>\n Will the presence of a third-party\u2019s AI tool \u201cabsolve the broker-dealer of any obligations as registered brokerdealers under the federal securities laws, including obligations related to Regulation Best Interest, supervision, books and records, best execution, customer disclosures, cybersecurity, privacy, order handling, and investor protection?\u201d the lawmakers asked Atkins in their letter.\u00a0<\/p>\n The letter also asked about guardrails related to funding limits, order size, trade approval procedures or restrictions on the agents\u2019 access to customer data. Lawmakers left open the possibility that Congress could act to \u201ceffectively address\u201d the risks.<\/p>\n At the hearing, Foster said that data privacy also represented \u201ca huge concern\u201d raised by the tools.\u00a0<\/p>\n \u201cWhen you start using these models, they make you scroll down and hit I accept that allow them to train their AI model on everything you tell it,\u201d Foster said. \u201cIf it\u2019s sitting there watching you trade, there\u2019s a lot of interesting training that can be done and traded against if you sell that data.\u201d<\/p>\n There is \u201cno shortage of things to worry about here,\u201d he added.\u00a0<\/p>\n