RegTech: U.S. Regulator's View on Artificial Intelligence in Risk Assessment

On 21 June at the OpRisk North America 2017 conference in New York, Scott W. Bauguess, Acting Director and Acting Chief Economist of the U.S. Securities and Exchange Commission's ("SEC") Division of Economic and Risk Analysis ("DERA") gave a keynote speech on the use of artificial intelligence by regulators. A transcript of the speech can be found here. Bauguess provided some interesting background on the utility and use of big data and machine learning at the SEC to identify potential misconduct by market participants and investment managers, and the emerging use of artificial intelligence. Bauguess' speech discussed the SEC's use of AI in its regulatory framework, initially discussing machine learning. The SEC currently applies topic modeling methods, such as Latent Dilchlet Allocation ("LDA").