Firms face potential legal liabilities regarding their transparency and client relationships Wall Street research and ChatGPT

How ChatGPT & AI May Disrupt Investment Research on Wall Street

Wall Street investment banks are beginning to consider the potential advantages of using artificial intelligence (AI) in investment research. However, the potential legal ramifications associated with this technology need to be further considered as watchdogs have raised concerns. According to a recent report from Goldman Sachs, generative AI could impact 35% of employment in business and financial operations by generating new, human-like output. Despite this finding, it is still unclear how AI technology will affect investment research.

ChatGPT and Fedspeak

The Federal Reserve Bank of Richmond’s new study suggests that as a generative AI product, ChatGPT can effectively analyze technical language. Fed watchers often apply interpretive and technical skills to predict monetary policy decisions, and GPT models can classify Fedspeak sentences well. However, there is a possibility that ChatGPT could fail to capture the nuances that a human evaluator could grasp, leading to errors in the future monetary policy decision analysis.

Laws Regarding AI Usage Lag Innovation

Legal experts have warned that there is still uncertainty regarding regulations for AI usage. While the use of AI and ChatGPT in Wall Street research products is not illegal, there exists a risk of regulatory action or litigation without proper governance. Regulation regarding AI usage is still in its early stages, and regulatory agencies are urging firms to oversee the use of rapidly-evolving automated systems to help mitigate risks.

While there are no current legal requirements for firms to disclose their use of AI-generated reports, it is best practice. Adding language about AI in their online privacy policies is one way financial firms are being transparent. There exists a risk that if clients are misled or deceived about how AI is used, it could be considered fraudulent.

Editor Notes

While AI has the potential to create new, human-like output and change the operation of investing, there are many legal limitations to consider. While AI technology has many advantages, it is not infallible, and its performance could change, causing potential risks. Additionally, investment firms must be transparent about their use of AI technology, or regulatory authorities will face increasing risks of litigation.

Readers interested in the latest news and updates on the AI industry can access them at GPT News Room.

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