Shearman & Sterling LLP Leveraging the Broad Potential of Artificial Intelligence While Mitigating the Risks | 8
Staying Up To Date With New Regulations
Because AI can pose legal, civil rights, and national
security concerns, many government bodies are
showing interest in regulating this new field. To ensure
compliance with applicable regulations, companies
must take steps to stay abreast of regulatory
developments. This is particularly true where a
company may be subject to multiple or overlapping
regulatory regimes.
The European Union has been most active in regulating
AI to date. In April 2021, the European Commission
proposed the European Union AI Act setting a
regulatory framework for artificial intelligence.
3
The
Act aimed to analyze and classify AI systems and
applications according to the risks they pose to users.
The European Council adopted the AI Act last year,
and the European Parliament adopted it in June of this
year.
4
The three parties are negotiating the details of
the final form of the law, with the goal of reaching an
agreement by the end of this year.
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The Act requires
Generative AI platforms to comply with transparency
requirements including disclosing that the content was
generated by AI, designing the model to prevent it from
generating illegal content, and publishing summaries
of copyrighted data used for training.
In the United States, there has been more of a
patchwork approach, and thus far, cities and states are
leading the way. For example, New York City recently
adopted a law requiring businesses that use AI hiring
tools to show that the recruitment process is free from
any bias.
6
Under this law, employers or employment
agencies must conduct an independent bias audit
and publish the results before using artificial
intelligence and algorithm-based technologies when
evaluating job candidates and employees in New York
City.
7
In essence, this law puts the burden on AI users
to identify and protect against potential harmful biases
in AI technologies, rather than on the companies that
develop those technologies. (Among other things, this
helps address otherwise difficult jurisdictional issues
that may hamper enforcement of the law against
developers without operations in New York.) Several
other states have enacted laws to study artificial
intelligence in anticipation of passing new regulations
addressing the emerging technology.
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There has also been some activity at the federal
level. In July, the SEC proposed new controversial
rules that would require broker-dealers and investment
advisers to take certain steps to address conflicts
of interest associated with using AI when interacting
with investors.
9
This proposal came on the heels
of the SEC Chairman Gary Gensler's remarks on
artificial intelligence before the National Press Club.
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8
See Zach Williams, "AI Regulation Ramping Up in States from Texas
to Connecticut," https://news.bloomberglaw.com/in-house-counsel/
ai-regulation-ramping-up-in-states-from-texas-to-connecticut
(August 28, 2023); see also Sophia Fox-Sowell, "California Gov.
Newsom orders study of generative AI use in state government,"
https://statescoop.com/california-newsom-generative-ai-
executiveorder-2023/ (September 6, 2023).
9
See U.S. Securities and Exchange Commission Press Release, "SEC
Proposes New Requirements to Address Risks to Investors from
Conflicts of Interest Associated with the Use of Predictive Data
Analytics by Broker-Dealers and Investment Advisers," https://www.
sec.gov/news/press-release/2023-140 (July 26, 2023); see also U.S.
Securities and Exchange Commission Press Release, "Conflicts of
Interest Associated with the Use of Predictive Data Analytics by
Broker-Dealers and Investment Advisers," https://www.sec.gov/files/
rules/proposed/2023/34-97990.pdf (July 26, 2023).
10
See "U.S. Securities and Exchange Commission, Chair Gary Gensler
Remarks before the National Press Club," https://www.sec.gov/news/
speech/gensler-isaac-newton-ai-remarks-07-17-2023 (July 17, 2023).
3
See European Parliament News, "EU AI Act: First Regulation on
Artificial Intelligence," https://www.europarl.europa.eu/news/en/
headlines/society/20230601STO93804/eu-ai-actfirst-regulation-on-
artificial-intelligence (June 8, 2023).
4
See Ryan Browne, "EU Lawmakers Pass Landmark Artificial
Intelligence Regulation," https://www.cnbc.com/2023/06/14/eu-
lawmakers-pass-landmark-artificial-intelligence-regulation.html
(June 14, 2023).
5
Id.
6
See Kevin Collier, "In NYC, Companies Will Have to Prove Their AI
Hiring Software Isn't Sexist or Racist," https://www.nbcnews.com/
tech/tech-news/nyc-companies-will-prove-ai-hiringsoftware-isnt-
sexist-racist-rcna92336 (July 5, 2023).
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Id.
