AI in action · Regulation
'Don't Wait for Regulators to Hold Your Hands': The SEC's Investment Management Director Says AI Guidance May Be 'Too Limited and Too Late'
The director of the SEC's Investment Management Division told advisers on October 19, 2026 that they should not 'wait for regulators to hold your hands' before using artificial intelligence, because guidance may be 'too limited and too late', according to Law360. The remarks follow the withdrawal of the 2023 predictive-analytics rule in June 2025, exam priorities for 2026 that mention AI in only two places, and a February speech by director Brian Daly inviting firms to request pilots and no-action letters.
The US regulator responsible for registered investment advisers has told them that it is not going to tell them how to use AI. Law360 reported on October 19, 2026 that the director of the Securities and Exchange Commission's Investment Management Division said advisers should not "wait for regulators to hold your hands" as they adopt artificial intelligence, warning that regulatory guidance may be "too limited and too late". The division is led by Brian Daly, who has made the same argument in gentler terms since February.
The remarks describe a deliberate vacuum. In June 2025 the SEC formally withdrew fourteen proposed rules, among them the 2023 proposal on predictive data analytics that would have created AI-specific conflict-of-interest obligations for advisers and broker-dealers; no AI rulemaking is pending. The agency's examination priorities for fiscal 2026 mention AI in only two places, fewer than the year before, and a sentence in the 2025 priorities about disclosures to investors tied to AI integration was removed for 2026. Chairman Paul Atkins said at a March roundtable that the commission's mandate to protect investors is technology-neutral.
What Daly has offered instead is a door. In a February 3, 2026 speech on the future of investment management, he said liability concerns were slowing AI adoption in the industry but that the obstacles "should not be insurmountable", and invited firms to share ideas and to request pilot programmes or no-action letters, the SEC's mechanism for telling a specific firm that staff will not recommend enforcement over a specific practice. He has separately backed advisers using AI for proxy voting. The October message is the same offer with the patience removed: the rules that exist, the fiduciary duty, the marketing rule, the books-and-records requirements, already apply to whatever an adviser does with a model.
Enforcement has not waited either. The SEC has already fined advisers a combined $400,000 for overstating their use of AI, the practice the agency calls AI-washing, and in September it sued four entities over fake AI trading schemes that took more than $15 million from retail investors. FINRA's 2026 oversight report added a section on generative AI and points firms to a supervision and model-risk framework. The pattern is that the regulators will act on outcomes, misleading claims and harmed investors, rather than on methods.
For an adviser deciding whether to let a model draft client communications, screen portfolios or execute rebalancing, the practical reading is that there will be no safe harbour to wait for. The FCA in London said the same thing the same day, with examples. The difference is that the SEC has a no-action process for firms that ask, and a director who has now said twice that he would like them to.
Sources: Law360 — SEC Official Tells Advisers Not To Wait For AI Guidance (Oct 19, 2026); SEC — Remarks by Brian Daly, Director, Division of Investment Management: Artificial Intelligence and the Future of Investment Management (Feb 3, 2026); ESG Dive — SEC director backs investment advisers using AI for proxy voting (2026); Clarista — SEC and FINRA 2026 Exam Priorities for AI