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When announcing the much publicized $125 million fine against JP Morgan for violating recordkeeping rules, the U.S. Securities and Exchange Commission (SEC) Chair stated that financial institutions did not act as if they got the message regarding unauthorized or unwatched written communications.[1] The Commodity Futures Trading Commission (CFTC) has also fined banks and brokerages billions of dollars for not saving communications.[2] For a long time, businesses had to worry about saving their own authorized communications, but more recently, the SEC has discovered that employees are purposefully discussing business on separate communications channels to avoid company eyes.[3]

As the fines become stiffer for current authorized and unauthorized messaging platforms, the race to develop artificial intelligence, including an AI-powered chatbox, is in full swing.[4] Early tests of AI chat tools show that AI can produce some offensive and crazy responses as they ingest a vast amount of text from the internet.[5] What will federal regulators make of these messages? It is even predicted that workers in the finance industry could be replaced by AI in the areas of financial advising, trading, accounting, and investment banking.[6] In announcing the fine against JP Morgan, SEC Chair Gary Gensler stated: As technology changes, its even more important that registrants ensure that their communications are appropriately recorded and are not conducted outside of official channels in order to avoid market oversight.[7]

Much has been said about the Department of Justices announced changes to its criminal enforcement policies.[8] Kenneth A. Polite, Jr., the Assistant Attorney General of the Criminal Division, emphasized that business-related electronic data and communications must be preserved, and accessible or negative consequences will flow. This includes communications on personal devices, communication platforms, or third-party messaging applications. AI generated messages or information will most likely also be considered business-related electronic data. It is unclear how erroneous or false information from AI will be viewed. But one thing is for sure, the SEC and other agencies will continue to investigate financial firms and whether they have gotten the message or not. Regulated firms need to invest time and resources in developing communications and retention policies now with an eye towards the future of AI.

[1] SEC will reward cooperation where firms mess up with unauthorized communication, Resources, Jennie Clarke, November 17, 2022, http://www.globalrelay.com/sec-will-reward-cooperation-where-firms-mess-up-with-unauthorized-communications.

[2] 16 Wall Street firms fined $1.8B for using private text apps, lying about it, Computer World, Lucas Mearlan, September 28, 2022, http://www.computerworld.com/article/3675289/16-wall-street-firms-fined-18b-for-using-private-text-apps-lying-about-it.

[3] Id.

[4] Microsofts new AI chatbox has been saying some crazy and unhinged things, NPR, Bobby Allyn, March 2, 2023, http://www.npr.org/2023/03/02/1159895892/ai-microsoft-bing-chatbox.

[5] Id.

[6] ChatGPT may be coming for our jobs. Here are the 10 roles that AI is most likely to replace, Business Insider, Aaron Mok and Jacob Zinkula, April 9, 2023, http://www.businessinsider.com/chatgpt-jobs-at-risk-replacement-artificial-intelligence-ai-labor-trends-2023-02.

[7] JPMorgan Admits to Widespread Recordkeeping Failures and Agrees to Pay $125 Million Penalty to Resolve SEC Charges, U.S. Securities and Exchange Commission Press Release 2021-262, December 17, 2021, http://www.sec.gov/news/press-release/2021-262.

[8] DOJ Takes Stance on Messaging Apps, Details Comp Reforms, Law 360, Stewart Bishop, March 3, 2023, http://www.law360.com/articles/1582115/doj-takes-stance-on-messaging-apps-details-comp-reforms.

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What is the Message from Artificial Intelligence | Butler Snow LLP ... - JD Supra