Democratic Lawmakers Demand SEC Clarification on AI-Powered Investment Advisors
Democratic members of the House have raised concerns with the SEC regarding trading platforms that deploy AI agent advisors capable of making "consequential investment decisions on behalf of retail investors."
Democratic lawmakers from the US House of Representatives are raising concerns with the nation's securities regulator about its supervision of artificial intelligence-driven investment advice and trading services.
Through a letter addressed to SEC Chair Paul Atkins on Tuesday, these congressional representatives expressed that the availability of AI trading agents to individual investors "raises serious questions for investor protection, broker-dealer responsibilities, market integrity, and the accountability of AI developers."
"While such trading may initially be limited in scope, there are indications that agentic trading could expand to a broad range of additional products, including options, cryptocurrency, event contracts, and futures," the lawmakers wrote.
The use of AI agents has seen increasing adoption within the cryptocurrency community as market participants attempt to secure advantages in the continuously operating market, a trend that has subsequently extended to individual traders of conventional stocks who are seeking assistance with their investment strategies.
Among the prominent platforms to introduce this type of functionality is cryptocurrency exchange Coinbase, which launched an AI agent this month that is built into its application. The company stated that it operates as a Securities and Exchange Commission- and Commodity Futures Trading Commission-registered financial adviser capable of providing trading recommendations.
The correspondence, spearheaded by Bill Foster, the ranking Democrat on the House Financial Services Financial Institutions Subcommittee, alongside Brad Sherman, the ranking Democrat on the Capital Markets Subcommittee, indicated that these agents have "operated largely outside the securities regulatory framework," despite the fact they are making "consequential investment decisions on behalf of retail investors."
According to the lawmakers, the disclosure statements that come with AI agents indicate that brokerage platforms cannot guarantee the precision or appropriateness of any AI-generated output or exercise control, monitoring or auditing capabilities over the agents.
These types of disclaimers "raise urgent questions about the regulatory treatment of agentic trading tools and create uncertainty regarding legal responsibility among brokers, AI developers and retail investors."
The correspondence requested that the SEC furnish written answers to a series of questions by July 31, which include what safeguards or evaluation procedures the agency has implemented for agents, under what circumstances an AI agent would be required to register, and the degree of its discussions with platforms regarding AI.
The letter additionally inquired whether the SEC possesses sufficient authority it requires to mitigate the risks associated with AI agents, or whether it needs legislative action from Congress to properly address them.
Representatives Stephen Lynch, Jim Himes, Sean Casten, Rashida Tlaib, Brittany Pettersen and Sylvia Garcia also signed the letter.