On February 3, SEC Division of Investment Management Director Brian Daly delivered a notable speech at the Investment Company Institute’s Winter Board Meeting, making an unusually direct appeal to the industry: start bringing your AI ideas to the SEC. Titled “Artificial Intelligence and the Future of Investment Management,” the speech was striking in both its tone and substance: less a recitation of regulatory expectations and more an open invitation for collaboration. Daly framed the current moment as a generational opportunity, arguing that the industry and its regulators have spent two decades making limited progress on technology modernization and that AI represents the catalyst to finally move forward.
A “Lost Generation” of Limited Progress
Daly opened the speech by reading a passage about the securities industry’s technology challenges—then revealed it was from a 2005 speech by then-SEC General Counsel Giovanni Prezioso. His point was sharp: twenty years later, the same core issues around electronic delivery, electronic communications retention, and outdated books and records requirements remain largely unresolved. He noted that the industry’s current push for “e-delivery” of fund documents essentially amounts to replacing snail mail with emailed PDFs, in Mr. Daly’s words, the industry is using 1990s technology to deliver disclosures in 2026. That, he argued, is digitizing paper, not innovating.
AI Adoption: Liability Fears Shouldn’t Be Insurmountable
Daly acknowledged that the biggest impediment to broader AI adoption in investment management is liability risk: advisers worry about exposure when AI-driven decisions lead to losses. He conceded that some of this anxiety stems from the SEC’s own examination and enforcement history around prior technology waves. But he argued these concerns are manageable, drawing a parallel to the industry’s earlier adjustment to algorithmic and quantitative models, which eventually settled into accepted disclosure and compliance practices. He was candid, however, that AI presents a fundamentally different challenge: unlike quant models where a human could pull the plug in real time, AI’s value proposition is precisely to take the human out of the real-time loop. That reality will require new approaches, but Daly urged the industry not to let perfect be the enemy of the good, especially since competitive pressures will force adoption regardless.
Reimagining Disclosure with AI Agents
Perhaps the most provocative part of the speech was Daly’s suggestion, offered explicitly as a “conversation starter, not guidance”, —that the industry consider deploying fund- or adviser-provided AI agents as a new model for investor disclosure. Instead of expecting retail investors to navigate a 200-page prospectus, SAI, supplements, and periodic reports, he asked the audience to imagine an autonomous AI agent trained on that entire library of fund documents, capable of answering plain-English questions from investors about fees, investment strategy, redemption mechanics, conflicts of interest, and performance comparisons. He acknowledged the obvious regulatory questions such as whether such a tool would constitute marketing, require investment adviser registration, or create supervisory challenges, but characterized these questions as solvable. He recalled Commissioner Peirce’s observation during his pre-hire interview that innovation in investment management has been rare because the SEC has historically either prohibited it or strangled it with regulation.
An Open Door—and a Signal
The speech closed with a direct invitation: if you have ideas, want to explore a pilot program, or would like to request a no-action letter or staff guidance on AI-related initiatives, come talk to the Division. Daly noted that Chairman Atkins has positioned the SEC as “The Innovation Commission,” and that inbound outreach from firms with novel, investor-friendly approaches will get the Division’s attention. For advisers and fund managers, the signal is clear: this Division leadership is actively looking to facilitate, not just regulate, AI adoption. That’s a meaningful shift in tone from prior administrations, and firms that engage proactively may have an opportunity to help shape the regulatory framework as it develops.