On February 3, SEC Director of the Division of Investment Management Brian Daly addressed how the division is considering the changes and opportunities AI affords investment advisers, investment companies, and investors. Daly stated that liability concerns continue to slow the adoption of AI in investment management, but he also emphasized that these challenges “should not be insurmountable.” He noted the industry’s effective navigation of technology-driven changes in the past, including balancing concerns regarding the use of algorithmic and quantitative models with commonly used disclosures and accepted compliance practices.
Citing the unique challenges posed by AI, and the expectation that the demand for AI use in investment functions will likely increase, Daly encouraged investment companies and advisers to engage with the SEC regarding innovative technologies — particularly AI-driven solutions for investor disclosure delivery functionality. He proposed reimagining disclosure delivery by leveraging large language models, allowing retail investors to interact with AI agents trained on fund documents and receive clear, plain-English answers to their questions. Daly acknowledged that regulatory and liability questions remain, including how such tools would be supervised and classified under existing rules, but maintained that these issues can be addressed through collaboration and thoughtful guidance. He invited industry participants to share innovative ideas and request pilot programs or no-action letters, while affirming the agency’s commitment to hearing and considering all ideas presented.
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