The European Union’s securities watchdog stated in its first AI statement that banks and investment companies cannot avoid boardroom responsibilities and a legal commitment to safeguard clients when employing artificial intelligence (AI).

On Thursday, the European Securities and Markets Authority (ESMA) outlined how financial institutions subject to EU regulations inside the 27-nation bloc can employ artificial intelligence (AI) in their daily operations without violating the EU’s MiFID securities legislation.

AI offers inherent risks and has the potential to have a substantial influence on the protection of retail investors, even while it has the capacity to improve investment strategies and client services, according to ESMA.

“Importantly, firms’ decisions remain the responsibility of management bodies, irrespective of whether those decisions are taken by people or AI based tools,” added ESMA.

“Central to the use of AI in investment services is the unwavering commitment to act in clients’ best interest, an overarching requirement which applies irrespective of the tools that the firm decides to adopt in the provision of services.”

The statement includes the use of third-party AI technology, including ChatGPT and Google Bard, with or without the direct knowledge and agreement of senior management, according to ESMA. It also covers situations when a bank or investment institution develops or adopts AI tools internally.

“The firm’s management body should have an appropriate understanding of how AI technologies are applied and used within their firm and should ensure appropriate oversight of these technologies,” stated ESMA.

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The statement is distinct from the EU’s historic AI regulations, which go into effect next month and may establish a worldwide standard for a technology used in daily life and business, and instead concentrates on compliance with MiFID.

The Group of Seven economies (G7) is also working to establish international safeguards to ensure the safe development of fast advancing technologies.

(Adapted from ThePrint.in)