- within Corporate/Commercial Law, Environment and Technology topic(s)
- in United States
As previously reported, sponsors are rapidly embracing artificial intelligence ("AI") across their operations and businesses, betting big on the technology's promises of meaningful efficiency gains and competitive advantages. The SEC has taken notice.
Beginning in 2023 under former Chair Gary Gensler, the Commission adopted an aggressive stance on AI, citing concerns regarding conflicts of interest, opaque decision-making and privacy.1 AI usage became a top examination priority,2 and Gensler publicly warned that, without intervention, AI would trigger a financial crisis.3
More recently, however, the Commission's tone on AI has changed. Commissioner Mark Uyeda urged for the avoidance of AI regulation that might impede innovation,4 and the SEC withdrew its proposed AI Rule.5
Still, AI remains squarely in the SEC's crosshairs. "AI-washing" and similar investor fraud continue to be key priorities for the Commission's Cyber and Emerging Technologies Unit.6 Additionally, as previously reported, the SEC and DOJ jointly announced two AI-washing-related enforcement actions, the first such cases under the Trump administration.7
Under new Chair Paul Atkins, sponsors should expect SEC scrutiny of AI to continue, albeit with a focus on transparency and risk-based disclosure rather than sweeping deterrence.
To best prepare for this continuing scrutiny, sponsors should ensure their AI-related disclosures are accurate, consistent and clearly identify all associated risks and conflicts; implement governance, training and documentation procedures for AI usage; closely involve legal and compliance teams throughout the development and deployment of AI tools; and regularly test such tools for accuracy and bias.
Footnotes
1. See Gary Gensler, "Isaac Newton to AI": Remarks before the National Press Club (July 17, 2023), available here. See also Gary Gensler, Remarks before the Financial Stability Oversight Council: 2023 Annual Report (December 14, 2023), available here.
2. SEC, SEC Division of Examinations, 2024 Examination Priorities (October 16, 2023), available here; SEC, SEC Division of Examinations, 2025 Examination Priorities (October 21, 2024), available here.
3. Financial Times, Gary Gensler urges regulators to tame AI risks to financial stability (October 15, 2023), available here.
4. Mark Uyeda, Remarks at the SEC Roundtable on Artificial Intelligence in the Financial Industry (March 27, 2025), available here.
5. SEC, Rulemaking Activity (reflecting the withdrawal of the proposed "Conflicts of Interest Associated with the Use of Predictive Data Analytics by BrokerDealers and Investment Advisers" rule on June 12, 2025), available here.
6. SEC, SEC Announces Cyber and Emerging Technologies Unit to Protect Retail Investors (February 20, 2025), available here.
7. In the Matter of Presto Automation Inc., Securities Act Release No. 11352; Exchange Act Release No. 102177 (SEC Jan. 14 2025), full order available here; Securities and Exchange Commission v. Albert Saniger, No. 1:25-cv-02937 (S.D.N.Y. filed Apr. 9, 2025), full complaint available here.
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