Menendez presses SEC chair about how the agency is addressing systemic racism, bias in AI tools
The Senator also highlighted how proposed changes to mutual funds will impact millions of New Jersey retirees
WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.) Tuesday questioned Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, during a U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing of the SEC.
Sen. Menendez questioned Chair Gensler about the potential risks the SEC has identified as AI tools become more widely used in capital markets, and inquired if the SEC is focused on identifying and mitigating potential risks.
“I want to point to something you’ve previously commented on which was ‘the challenges of explainability may mask underlying systemic racism and bias in AI predictive models.’ Minorities already face disproportionate trouble in accessing capital, and poorly built AI tools have the potential to entrench or expand those gaps,” Menendez said. “So, it seems to me that while we can think about what AI could do in the positive sense within the capital markets, the SEC should be focusing on mitigating what are the potential risks.”
Sen. Menendez also questioned Chair Gensler about the progress the SEC has made on adopting recommendations submitted unanimously by the SEC’s Asset Management Advisory Committee, in particular, the requirement for enhanced disclosures by investment companies and advisors regarding diversity within their workforces and leadership.
“Two years ago, the SEC’s Asset Management Advisory Committee unanimously submitted four recommendations for actions the SEC could take to improve diversity in the asset management industry. You and I have spoken about this on several occasions, and the last time you were here the SEC had adopted two of the recommendations and you said that the other two were still being considered,” Menendez said.
Sen. Menendez concluded by inquiring about the economic analysis the Commission conducted on its proposed rule on mutual funds. The Senator made it clear that he wants to know how proposed rule change could impact everyday Americans and their ability to save for retirement.
Sen. Menendez has long pushed for improving corporate diversity, and in June, along with Rep. Gregory W. Meeks, reintroduced the Improving Corporate Governance Through Diversity Act of 2023. The bicameral legislation, originally introduced in 2017, would require public companies to annually disclose the gender, race, ethnicity and veteran status of their board directors, nominees, and senior executive officers.
The group of senators questioned the companies, who control some of the largest corporate pension plans in the U.S., regarding their practices in seeking, selecting, and retaining diverse-owned asset management firms to manage their pension and or treasury funds.
