Regulators in the US and the UK are using Artificial Intelligence-driven tools to identify problems in financial firms’ disclosures, with compliance specialists warning that supervisors may now be ahead of parts of the industry in practical deployment. The focus is especially sharp on fund fact sheets and other product disclosure documents, where inconsistencies and deficiencies can be detected at scale.
David Thelander, managing director, global regulatory and Artificial Intelligence strategy at Norm Ai in San Francisco, said regulators in the US and the UK have formally written to firms to inform them about disparities in fund fact sheets. He said his firm had several clients, in the US and globally, who have received enforcement subpoenas from the US Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) or the UK Financial Conduct Authority (FCA). He said the SEC’s division of economic risk and analysis (DERA) has deployed sophisticated analytics teams to identify disclosure deficiencies and inconsistencies without registrantsʼ knowledge.
Thelander argued that financial services firms remain constrained by manual processes, leaving regulators a step ahead in some areas, particularly disclosures. He suggested firms should build their own “digital workforce”, describing supervisory Artificial Intelligence agents that can act as supervisors to help keep pace with disclosure rules and oversee other operational tasks, including monitoring customer service chatbots.
Regulators in the European Union and the UK are either already using Artificial Intelligence or considering broader adoption. The FCA has told retail-focused institutions it would like to deploy its own “regbots” to monitor customer service. Finland’s Financial Supervisory Authority (FIN-FSA) has identified more than 100 use cases for generative Artificial Intelligence, which it is testing as part of an ongoing Artificial Intelligence development programme. The regulator said supervisory tasks, especially those related to regulatory reports and product disclosures, are a “sweet spot” for generative Artificial Intelligence applications.
