A financial industry group called on the SEC Monday to withdraw its proposal on potential conflicts of interest related to the use of artificial intelligence by financial professionals. The group argues that the regulation could harm retirement savers. The rule proposal, released in July, requires investment advisors and brokers who use artificial intelligence and predictive data analytics to "eliminate or neutralize" situations where technology prioritizes their own interests over those of the investor. The regulation covers a broad range of technologies and has faced criticism from the financial industry. The ERISA Industry Committee, which represents retirement plan sponsors, stated that the rule would impact tools that investors rely on, including those related to retirement savings. They called for the proposed rule to be withdrawn. The SEC spokesperson stated that all comments would be reviewed during the open comment period. SEC Chair Gary Gensler emphasized the need for protection against conflicts arising from predictive data analytics-driven interactions.

Comment letters on the proposal are due on Tuesday, and criticism of the rule is expected from various organizations. Morningstar Inc. plans to submit a comment letter expressing its concerns about the proposal's broad scope. The American Securities Association also opposes the proposal and finds it excessively broad. Some Republican members of Congress suggest that the proposal aims to replace existing regulations without transparency. The SEC may want to reconsider existing regulations, such as Reg BI and fiduciary duty, as an alternative to the AI proposal. Trade associations are urging the SEC to withdraw the measure. The potential impact of the proposal on SEC staffing could lead to limited enforcement and exams.