S 3554 — FAIRR Act

Summary

Financial Artificial Intelligence Risk Reduction Act or the FAIRR ActThis bill addresses the impact of artificial intelligence on financial markets.The bill requires the Financial Stability Oversight Council to coordinate with agencies regarding threats to the financial system posed by artificial intelligence, including the use of false representations of the likeness, speech, or actions of persons to manipulate or to cause disruptions to financial markets. The council must report on its findings and make policy recommendations to Congress. After congressional review, the council must implement these recommendations.The Securities and Exchange Commission is allowed to seek treble civil penalties for violations of federal securities exchange law that involve machine-manipulated media.The bill establishes liability for a person who, directly or indirectly, deploys or causes to be deployed an artificial intelligence model involved in a securities law violation.The bill also provides for the regulation and supervision of certain financial organizations and service providers. For example, if a credit union that is subject to examination by the Board of Directors of the National Credit Union Administration delegates the performance of certain activities and services, this delegation must be disclosed and is subject to regulation and examination by the board.

Bill Text

• Introduced Introduced in Senate Current html December 18, 2023

Compared against current U.S. Code AI-generated reading aid — verify against the official bill.

The bill establishes new duties regarding artificial intelligence for the Financial Stability Oversight Council and includes provisions related to its regulation and oversight.

• 12 U.S.C. 5321

  SEC. 126. SPECIAL PROVISIONS REGARDING ARTIFICIAL INTELLIGENCE IN THE FINANCIAL SECTOR.

  This adds a new section that outlines the Council's duties related to artificial intelligence in the financial sector.

• 12 U.S.C. 5321

  The Council shall coordinate with member agencies with regard to potential risks to the stability of the financial system posed by artificial intelligence.

  This mandates collaboration to assess risks associated with AI in finance.

• 12 U.S.C. 5321

  not later than 180 days after the date of enactment of this section, in consultation with the member agencies, financial institutions, securities market participants...submit to the Committee on Banking, Housing, and Urban Affairs...a report.

  This requires the Council to submit a report on AI threats to Congress within a specified timeframe.

• 12 U.S.C. 5321

  The Federal and Banking Information Infrastructure Committee...shall, in consultation with private-sector entities...initiate a series of scenario-based exercises to test the effectiveness of defenses against financial market disruptions associated with the use or assistance of artificial intelligence technologies.

  This establishes scenario-based exercises to evaluate financial market resilience against AI disruptions.

• 12 U.S.C. 5321

  Congressional Review Act.--The provisions of chapter 8 of title 5, United States Code, shall apply as appropriate to rules issued by the member agencies under this section.

  This subjects new rules to the provisions of the Congressional Review Act.

• 12 U.S.C. 1786a

  that → an

  This makes a grammatical correction for clarity.

• 12 U.S.C. 1786a

  , in a manner and method prescribed by the Board,

  This specifies that the Board prescribes methods for certain reporting.

• 12 U.S.C. 1786a

  by striking subsection (f).

  This removes an existing subsection from the Federal Credit Union Act.

• 12 U.S.C. 5321

  Whenever a regulated entity or the Office of Finance causes to be performed for itself...any activity that is permissible for the regulated entity...such performance shall be subject to regulation and examination by the Director.

  This establishes regulatory oversight for service providers performing activities for regulated entities.

• 15 U.S.C. 78u(d)(3)

  Amount of penalty for violation involving machine-manipulated media.--The amount of a civil penalty...for a violation involving the use of machine-manipulated media...shall not exceed 3 times the penalty otherwise determined.

  This creates a provision for increased civil penalties related to machine-manipulated media violations.

• 15 U.S.C. 78a

  Any person who, directly or indirectly, deploys or causes to be deployed, an artificial intelligence model shall be deemed to satisfy the scienter...requirements of the Federal securities laws.

  This establishes liability for individuals deploying AI models in the context of securities laws.

• 15 U.S.C. 78a

  Civil liability of a developer of an artificial intelligence model for design defects...may not be waived.

  This restricts waivers of liability for AI model developers concerning violations of securities laws.

Action History

1. June 12, 2024

   Committee on Banking, Housing, and Urban Affairs. Hearings held. Hearings printed: S.Hrg. 118-558.

2. February 08, 2024

   Committee on Banking, Housing, and Urban Affairs. Hearings held.

3. February 01, 2024

   Committee on Banking, Housing, and Urban Affairs. Hearings held. Hearings printed: S.Hrg. 118-592.

4. December 18, 2023

   Introduced in Senate

5. December 18, 2023

   Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Sponsors

• Mark R. Warner · Primary

Subjects