LONDON, May 30 Reuters Banks and investment firms in the European Union cannot shirk boardroom responsibility and a legal obligation to protect customers when using artificial intelligence AI, the bloc39;s securities watchdog said in its first statement on AI.

The European Securities and Markets Authority ESMA on Thursday set out how financial firms regulated in the 27country bloc can use AI in daytoday operations without falling foul of the EU39;s MiFID securities law.

While AI holds promise in enhancing investment strategies and client services, it also presents inherent risks, and the potential impact on retail investor protection is likely to be significant, ESMA said.

Importantly, firms39; decisions remain the responsibility of management bodies, irrespective of whether those decisions are taken by people or AI based tools, ESMA said.

Central to the use of AI in investment services is the unwavering commitment to act in clients39; best interest, an overarching requirement which applies irrespective of the tools that the firm decides to adopt in the provision of services.

The statement covers not just instances where AI tools are developed or adopted by a bank or investment firm itself, but also the use of thirdparty AI technologies, such as ChatGPT and Google Bard, with or without the direct knowledge and approval of senior management, ESMA said.

The firm39;s management body should have an appropriate understanding of how AI technologies are applied and used…