The FCA Is Reassured By AI Usage So Long As Funds Remain Accountable
There’s no getting around the fact that the investment sector is being rocked by AI, with the FCA’s year-long review into its suggested practice finally out in the world.
Led by Executive Director Sheldon Mills, the UK’s financial regulator is spearheading AI use cases that can be fit for purpose across financial services, in regards to standards set by its Consumer Duty principles: the protection of customers, and for firms to put their needs first.
The published report suggests no new rules for AI will be implemented on top of this existing framework. However, the scrutiny over AI tools will still remain while firms get to grips with GenAI usage for producing or approving fund marketing content.
Accountability remains a priority. Firms are essentially responsible for handling approvals and being answerable to any outcomes made by their AI systems.
This is particularly true for financial promotions. Under COBS 4.2 rule, any communication must be “fair, clear, and not misleading.” It’s likely that the trend of using GenAI for fund content will only grow for drafting updates, triaging for reviews, or personalising email outreach. But if autonomous AI becomes more an active participant in a sign-off process, beyond its role as a planning or drafting aid, this muddies the waters around human control over materials and how they can be interpreted by investors.
Pointers for fund marketing teams
The recommendations from the FCA report point to the continuous monitoring of AI-assisted promotions, and not regular spot-checks. As a compliance matter, fund marketing teams have to show who reviewed what, if any unsubstantiated claims were remedied before publishing, and who signed off on it. Humans must be ‘in the loop’ and very much proactive across the whole process. Saying “this was written by AI” is not going to sail as a defense anymore.
As such, the following structured trails could be implemented to help fund marketing teams:
What the AI inputs were
How its resulting output is measured
Where humans need to step in during the approval workflow
Who to assign as a specific accountable reviewer and sign-off lead
This will stand firms in good stead under the FCA’s increasing AI supervision, despite no new rule being drafted as yet; good news for UK-based managers to start documenting their GenAI tools and approvals process before AI rulemaking heats up.
Source: “Review into the long-term impact of AI on retail financial services (the Mills Review)” fca.org.uk
