The European Securities and Markets Authority (ESMA) has published a statement for firms using artificial intelligence (AI) technologies to provide investment services to retail clients.
The report argues that, while AI offers opportunity to firms, there remain significant areas of risk that need to be considered.
Areas of potential concern include privacy and security problems, algorithmic biases and data quality issues, as well as an over-reliance on AI for decision making.
In line with the relevant MiFID II requirements, the guidelines aim to help companies comply with the organisation and conduct of business, as well as the regulatory obligation to act in the best interest of the client.
“By fostering transparency, implementing robust risk management practices, and compliance with legal requirements, ESMA [aims] to help firms ensure they harness the potential of AI while safeguarding investors' confidence and protection,” says the report.
ESMA and the National Competent Authorities (NCAs) say they will monitor the use of AI in investment services to decide if further action is needed in this area.
