Hong Kong – 27 October 2020 – Reflecting the rapid evolution of artificial intelligence (AI), its use in the financial services sector and growing regulatory scrutiny, the FinTech Association of Hong Kong (FTAHK), in collaboration with LITE Lab@HKU, has responded to the International Organization Of Securities Commission’s (IOSCO) consultation report on the use of artificial intelligence and machine learning by market intermediaries and asset managers.
The response strongly agrees with IOSCO that the use of AI and ML by market intermediaries and asset management firms creates novel opportunities and risks, with an overall need to foster trust in AI and financial markets. We believe that such risks should be appropriately mitigated by proportionate regulation that continues to foster responsible innovation in a way that promotes market integrity, fairness and investor protection, financial stability, competition and innovation. It should also support financial inclusion and combat financial crime.
Our Consultation Response draws the IOSCO Board’s attention to four important themes:
(1) Encouraging the use of AI/ML in RegTech
(2) Addressing unintended consequences that may discourage innovation
(3) Guidance on Proportionality Factors (especially for Customer and Client Disclosure)
(4) Human-In-The-Loop approach to address AI fairness, accountability and transparency
FTAHK and LITE Lab@HKU thank the IOSCO Board for inviting broad and representative participation in its Consultation Report. Together, they hope that the final guidance will encourage responsible innovation in a way that avoids unintended consequences whilst promoting fair and efficient markets, financial stability, innovation and competition. The final guidance should also support financial inclusion and offer customers and clients the benefits of AI/ML innovation.
Benjamin Quinlan, Chairman of FTAHK, said, “The rapid increase in the use of AI presents challenges in terms of building trust , particularly for FinTechs. Through providing the voice of our members to IOSCO, we want to ensure that when regulation does come it is proportionate, does not have unintended consequences, and encourages robust and efficient financial markets.”
Brian Tang, who is LITE Lab@HKU founding executive director, Co-Chair of the FTAHK RegTech Committee and one of the response’s authors, said, “As global attention towards algorithmic fairness, accountability and transparency grows, regulators worldwide can play an important role in reinforcing a human-in-the-loop (“HITL”) approach in the design, development, deployment and maintenance stages of AI/ML systems. A globally inclusive HITL approach will better embed the principles of investor protection and market integrity and stability into the beneficial innovations that AI/ML can bring to our internationally inter-related capital markets, and in turn to our broader society.”