FedScoop: ” SEC and CFTC oversight of how investment vehicles use AI to inform trading decisions is lacking and poses risks to market stability, a report from the majority staff of the Senate Homeland Security and Governmental Affairs Committee finds. Federal financial regulators are playing catch-up in their oversight of how hedge funds are using artificial intelligence to guide trading decisions, presenting a serious risk to market stability, the majority staff of the Senate Homeland Security and Governmental Affairs Committee warned Friday. In a 45-page report, shared exclusively with FedScoop and led by HSGAC Chair Gary Peters, D-Mich., staffers found the combination of recent regulatory actions and the current federal legal framework to “insufficiently address the evolving uses of AI in the financial services sector, including by hedge funds in trading decisions.” “The report also finds that the risks of future impacts resulting from AI use in investment decisions go beyond potential harm to individual investors and could have an impact on wider financial stability,” the authors wrote. “Use of more complex approaches to AI in the financial sector, absent any uniform basic guiding principles and industry-wide rules, increases risks to both individual investors and markets.” The surging prevalence of AI across the financial services sector has been especially pronounced among hedge funds, the report noted of the investment vehicles that are responsible for more than $5 trillion in assets under management in the country…” [h/t Pete Weiss]