CAPITAL MARKETS | ESMA on artificial intelligence and investment services

On 30 May 2024, the European Securities and Market Authority (ESMA) issued a statement providing preliminary guidelines to entities (investment firms and credit institutions alike) using artificial intelligence (AI) technologies when providing investment services to retail clients (the “Statement”). While the advancements of AI have the potential of transforming the landscape of retail investment services, promising to enhance investment strategies and client services, they present inherent risks, including algorithmic biases, data quality issues, opaque decision-making by firms’ personnel, and privacy and security concerns linked to the collection, storage and processing of the large amount of data needed by AI systems. When using AI, ESMA expects firms to comply with Directive (UE) No. 2014/65 (MiFID II) requirements, particularly in relation to (a) organisational aspects, (b) conduct of business, and (c) regulatory obligations, to ensure the clients’ best interests. The Statement is therefore intended to serve as a temporary guide to the fulfilment of MiFID II obligations, while the national competent authorities keep monitoring both the evolution of the phenomenon and the relevant EU legal framework to determine whether further action is needed.

Newsletter n. 98 – July 2024