The impact that Artificial Intelligence (“AI”) is making on investment services has been the subject of a recent publication, dated 1st February 2023, which was issued by the European Securities and Markets Authority (“ESMA”).
The publication, entitled “Artificial intelligence in EU securities markets”, provides data on the methods that stakeholders are implementing to incorporate powerful digital tools in their regulated financial products.
ESMA’s publication makes reference to the inherent notion that AI is an “umbrella” term which incorporates machine-learning as well as other forms of Big Data solutions. In fact, ESMA notes that in the funds industry certain managers use AI-powered investment strategies but “only a few of them have developed a fully AI-based investment process and publicly promote the use of AI.”
Irrespective of whether the use of AI is publicised in the offering memorandum, scenarios where risk and investment strategies are entrusted to AI systems raise several legal and regulatory questions whose answers are outside the current legislative precincts.
In this series of briefings, our Firm will be sharing weekly insights on the regulatory impact of AI on funds and investment services from a European Union law perspective, with reference to Maltese law.