Hong Kong SFC issues circular on the use of generative AI language models
The Hong Kong SFC issues guidelines for licensed corporations on responsible use of generative AI language models, emphasizing risk management, compliance, and investor protection.
Hong Kong SFC Issues Circular on the Use of Generative AI Language Models
On 1 July 2024, the Hong Kong Securities and Futures Commission (SFC) released a circular providing comprehensive guidelines for licensed corporations (LCs) on the responsible adoption and use of generative artificial intelligence language models (AI LMs) in their operations.
Background and Context
With the rapid advancement and integration of AI technologies in financial services, the SFC recognizes both the opportunities and risks posed by generative AI tools. These models can enhance efficiency, client engagement, and data analysis but also raise concerns around data privacy, model transparency, and potential misuse.
Key Guidelines and Expectations
- Risk Management: LCs must implement robust controls to identify, assess, and mitigate risks associated with AI LMs, including operational, compliance, and reputational risks.
- Compliance with Regulatory Requirements: Use of AI LMs should comply with existing laws and regulations, including those related to data protection, anti-money laundering, and fair dealing.
- Transparency and Explainability: LCs should ensure that AI-generated outputs are explainable and that clients are informed when AI tools are used in decision-making processes.
- Data Privacy and Security: Strict measures must be in place to protect sensitive client information and prevent unauthorized data access or leakage.
- Human Oversight: AI outputs should be subject to human review to prevent errors, biases, or inappropriate recommendations.
Implications for Market Participants
Licensed corporations are encouraged to adopt a cautious and well-governed approach when integrating generative AI language models. This includes updating internal policies, training staff on AI risks, and engaging with regulators proactively.
Conclusion
The SFC’s circular underscores the regulator’s commitment to fostering innovation while safeguarding market integrity and investor interests. As AI technologies evolve, ongoing dialogue between the SFC and market participants will be essential to balance innovation with prudent risk management.
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