Artificial intelligence is far and away the top compliance concern for registered investment advisor firms, which have been creating formal policies and procedures governing the deployment of the technology in their firms.
In a new survey of compliance professionals at RIAs, 85% rank AI as one of the most pressing issues in their field. A distant second was cybersecurity, cited by only 37% of respondents to the poll, fielded by the Investment Adviser Association, ACA Compliance Group, and Yuter Compliance Consulting.
"In 21 years of this survey, we have never seen a single topic command this kind of separation from everything else on the agenda," says ACA Group President Carlo di Florio. "What makes this year's results particularly meaningful is that firms are no longer just naming AI as a concern -- they are allocating compliance resources, standing up governance committees, and increasing testing."
Compliance professionals were asked to select three items from a list of dozens of topics ranging from digital assets to whistleblowing. Following AI and cybersecurity were privacy and the Securities and Exchange Commission's Regulation S-P, cited by 35% of respondents; advertising and marketing (19%); and prediction markets (14%).
With AI, the survey highlighted the substantial work many advisors have already done in the area, with 80% of respondents saying that their firm has formally adopted AI tools and 86% saying that they have implemented acceptable use policies, up from 64% last year.
Similarly substantial majorities of respondents say that their firm has an inventory of approved AI tools (86%) and has updated its training program to include AI risks and proper uses (72%), while 59% say that their firm has formed AI governance committees and another 10% say they are developing them.
"This year's data tell a clear story: AI has moved from the watchlist to the work plan," says Amy Yuter, managing principal of Yuter Compliance Consulting.
While AI may be top of mind for compliance professionals, it isn't yet clear how regulators will incorporate the technology into their oversight of the industry. Meanwhile, respondents say that their recent experiences with the SEC have been largely similar to how the agency operated in previous administrations, with examiners focusing on core issues such as marketing and record-keeping.
"[T]he consistency we see in SEC examination focus areas -- advertising, books and records, conflicts of interest -- is a reminder that firms must address emerging technology risks while continuing to deliver on their core compliance obligations," says Karen Barr, president and CEO of the Investment Adviser Association.
Write to advisor.editors@barrons.com
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