UK Regulator Weighs AI Rules for Financial Advice

The UK's Financial Conduct Authority (FCA) has been urged to consider regulating large language models such as ChatGPT, Claude and Gemini because of their growing influence on consumers' financial decisions.

In a report released on Monday, Sheldon Mills, the FCA's executive director of consumers and competition, said more than a quarter of UK consumers trust AI tools for financial advice. However, many do not realize these technologies are not covered by the legal protections that apply to regulated financial services.

Only authorized firms are permitted to provide financial advice. At the same time, chatbot recommendations are becoming increasingly sophisticated, blurring the line between general information and personalized advice. Mills recommended that the FCA review the implications of AI models that fall outside the current regulatory framework within six months.

Jonathan Herbst of law firm Norton Rose Fulbright said the findings highlight the urgent need to modernize legislation to keep pace with rapid advances in AI.

The report also warned of concentration risk, noting that 81% of financial firms worldwide had adopted AI at some level, with 40% using it at more advanced stages. The widespread use of systems from a small number of technology providers for critical operations, complaint handling and investment decisions creates the risk of a single point of failure across the financial system.

Bank of England Deputy Governor Sarah Breeden recently made a similar case for tailored regulation of autonomous AI agents operating without human intervention.

(Reuters, Max)