On June 25, the International Organization of Securities Commissions (IOSCO) published a consultation report and proposed guidance regarding the use of artificial intelligence (AI), and machine learning (ML) by asset managers and market intermediaries.
The proposed guidance, although not binding, aims to assist IOSCO members in the determination of their legal and regulatory frameworks applicable to intermediaries and asset managers using AI and ML.
The consultation report outlines 6 measures that should be considered by members, requiring:
A designated senior management responsible for the oversight of the development, testing, deployment, monitoring and controls of AI and ML
Adequate and regular testing and monitoring of the algorithms to validate the results of an AI and ML technique
Individuals with the relevant skills, competences and experience to develop, test, deploy, monitor and control AI and ML
Firms to understand their reliance and manage their relationship with third party providers, including monitoring their performance and conducting oversight
Disclosure of meaningful information to customers and clients around their use of AI and ML that impact client outcomes as well as determining what type of information they may require from firms using AI and ML for reporting purpose and appropriate oversight
Firms to have appropriate controls in place to ensure that the data that the performance of the AI and ML is dependent on is of sufficient quality to prevent biases and sufficiently broad for a well-founded application of AI and ML
The consultation report also gives information on the current and various use of AI and ML by asset managers and intermediaries (e.g. portfolio management optimisation, advisory and support activities, risk management…), and the approach taken by regulators (including Canadian securities regulators) to address the challenges created by those technologies.
Comments are to be submitted by October 26, 2020.
The draft report can be found here: