Technology & Conflicts of Interest: Proposal Background and Overview (Part One of Two)

On July 26, 2023, the SEC proposed new requirements (Proposal) to address risks to investors from conflicts of interest associated with the use of predictive data analytics (PDA) by investment advisers and broker-dealers (collectively, firms). The Proposal, which was published in the Federal Register on August 9, 2023, would require firms to take certain steps to eliminate or neutralize the effect of conflicts of interest associated with their use of PDA, artificial intelligence and similar technologies to interact with investors – notably, disclosure of such conflicts would not be an option. The deadline for comments to the Proposal is October 10, 2023. If adopted as is, the Proposal could have serious implications for advisers to hedge funds that use even the most basic technology. This article, the first in a two-part series, explains the events that lead to the Proposal and provides an overview of its key elements. The second article will discuss questions raised by the Proposal and its implications for hedge fund managers. See “Understanding and Mitigating Risks of Using ChatGPT and Other AI Systems” (Jul. 6, 2023).

To read the full article

Continue reading your article with a HFLR subscription.