AI Is Reshaping Advisor Exams: SEC Roundup
Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of the nonprofit advocacy group Investor Choice Advocates Network.
The SEC has long used data analytics to target advisors, and now artificial intelligence is poised to supercharge that capability. The SEC launched an artificial intelligence task force in August.
In this episode, Morgan and Zaccaro sit down with Stan Yakov — law professor at Fordham Law School, formerly with Citadel, and founder of RegLabs AI — to explore how AI is reshaping regulatory examinations and enforcement, and what advisors need to know.
Yakov, whose firm applies what he calls a "Moneyball meets regulation" approach — drawing on 25 years of enforcement data, rulemaking, speeches, and guidance from 300 global regulators — explains how AI can help advisors anticipate exam hot spots, including gaps between what regulators say they prioritize and what they actually enforce. Think custody requirements, the marketing rule, valuation issues and Rule 206(4)-7 compliance.
Morgan warns of "investigative slop" — AI-assisted subpoenas and inquiries that are easy to generate but sloppy in execution, potentially sweeping up advisers in low-quality investigations. The SEC has its own chief AI officer and an internal task force, and both guests expect a hybrid model of in-house development and outside partnerships.
The bottom line for advisors: The same tools that can help you prepare for an exam can help an examiner prepare to conduct one. The arms race has begun.
See the video for the discussion.
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