Congressional task forces could negate proposed SEC AI rule

Bipartisan groups aim to pass five to 10 laws this year from the 191 bills still pending, to protect national and personal security, possibly bar SEC from trying to regulate AI in financial markets

The U.S. House of Representatives are forming a bipartisan task force charged with keeping Congress actively involved in the development and deployment of artificial intelligence (AI) capabilities even in the absence of actual legislation.

The goal of the task force is to figure out how to keep the technological development of AI applications moving forward as quickly as possible while also trying to determine “guardrails that may be appropriate to safeguard the nation” against the negative potential of AI when misused or applied with malice, according to a Feb. 20 announcement signed by House Speaker Mike Johnson (R-La) and minority leader Hakeem Jeffries (D-NY).

The task force will also put together a comprehensive report defining those threats and potential countermeasures and the regulatory standards or additional legislation required to protect both consumers and investors in AI innovations.

Johnson and Jeffries have each appointed 12 members from their own parties for the Bipartisan Task Force on Artificial Intelligence, which will be co-chaired by Rep. Jay Obernolte (R-Ca.) and Rep. Ted Lieu (D-Ca.).

The announcement of the task force came less than a month after the House Financial Services Committee announced its own bipartisan AI Working Group to look into how AI is being used in the housing and financial services industries and how existing legislative and regulatory efforts may address the use of AI.

Both groups are part of an overall federal effort to address the regulation of AI, which grew as a priority for both parties along with the skyrocketing popularity of generative-AI models such as ChatGPT, which took off during 2023. The drive to establish “safe” guardrails for AI became much more focused following the executive order President Biden issued Oct. 23 ordering federal agencies to encourage both innovation and regulation in an effort to accelerate the safe, secure and trustworthy development of AI applications. The order created an AI council for high-level coordination of federal efforts and the web site to help recruit candidates with advanced AI skills for jobs with federal agencies.

Sifting through the 191 AI bills pending in Congress

The new House task force will aim to winnow down the 191 AI-related bills currently pending in Congress into five to 10 the House could pass this year, according to remarks made by task force member Rep. Don Beyer (D-Va.) at the State of the Net Conference in Washington, D.C. on Feb. 12.  

It may take some time to cull consistent goals or best practices from the wild variety of bills in Congress and the largely independent efforts of federal agencies to regulate AI within their own domains, however.

The Federal Communications Commission (FCC) banned the use of AI-generated voices in phone calls after thousands of potential New Hampshire voters received deepfaked, Biden-impersonating robocalls in January telling them to stay home rather than going out to vote in their state’s primary election.

The SEC proposed a new rule in 2023 that would require broker-dealers and investment advisers to disclose some information about their use of AI and to demonstrate that any AI-enabled analysis or investment-recommendation software could not make recommendations favoring the fund or investment adviser over the investor’s best interest.

Some of the AI-related bills pending in Congress – including some sponsored or supported by members of the House Finance Committee working group on AI – include language that would limit the ability of the SEC to regulate the use of AI in financial services and would roll back the SEC’s AI rule proposal if the commission eventually approves it.

The membership of the House Finance Committee’s AI working group includes Rep. Patrick McHenry (R-NC), who chairs the committee and has been one of the most vocal opponents of SEC regulations on both AI and cryptocurrency, as well as the committee’s ranking Democrat Rep. Maxine Waters (D-CA), who helped launch the first congressional task force on financial technology and artificial intelligence in 2019 and advocated repeatedly during 2023 for hearings and federal studies investigating the impact of AI on housing markets, investment markets and financial services.

One key goal of the working group will be to educate House members on the potential risks and benefits of AI, McHenry said in the announcement and to explore ways to “leverage artificial intelligence to foster a more inclusive financial system, while establishing the U.S. as a world leader in AI development and terms of use.”

Some members of the committee have questioned the SEC’s power to regulate AI in financial services, but that concern is not universal even among Republicans, especially in the Senate, where the list of AI-related bills includes a proposal to establish a new independent licensing body that would set standards for AI developers and have the power to conduct audits into companies’ use of AI.

Working groups and task forces can start to resolve those differences, but it would be “vain” to think Congress could regulate anything as complex and rapidly evolving as AI in one “really big masterful bill,” Beyer said. But “[if] we can act in a bipartisan way, we can pick the best five or 10 bills out of these 191 that make a difference, and then build on that in the years to come will be a very healthy thing.”