Compliance Impact Alert:
Use of generative AI language models
Dec 2024
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Executive Summary
On 12 November 2024, the Securities and Futures Commission (“SFC”) issued a circular addressing the risks associated with generative AI language models (“AI LMs”) for licensed corporations (“LCs”).
The SFC mandates enhanced cybersecurity protocols and responsible use of AI LMs to mitigate risks such as output quality issues, data management vulnerabilities, and reliance on external providers. LCs must implement robust policies, conduct thorough testing, and ensure compliance with regulatory standards.
Actions and Recommendations
Review Existing AI Implementations | Assess current AI systems for compliance gaps and plan corrective actions. |
Develop AI Risk Assessment Frameworks | Create frameworks to identify high-risk applications and mitigation strategies. |
Implement Enhanced Monitoring and Validation | Regularly evaluate AI model performance and check for biases or inaccuracies. |
Staff Training | Educate employees on new AI governance requirements and ethical AI use. |
Update Third-Party AI Provider Agreements | Ensure agreements meet regulatory expectations, focusing on data handling and compliance. |
How We Can Help
Our team comprises experienced professionals with deep expertise in compliance, risk management, and policy review and development in identifying gaps between the regulatory expectations in the circular and your current policies and procedures.
1. Continuous Support: Stay ahead of regulatory changes with our continuous monitoring and updates, ensuring that you are always in compliance.
2. Gap Analysis: Identify gaps between regulatory expectations and your current policies.
3. Develop Tailored Solutions: Create solutions to meet specific needs and close material gaps.
4. Ensure Adherence: Maintain compliance with regulatory standards and enhance overall compliance practices.
For any inquiries, please refer to our Ongoing Compliance Support Service or feel free to Contact us.