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Letter Summary:
The Canadian Securities Administrators (CSA) are seeking feedback on several consultation questions regarding its Staff Notice and Consultation 11-348 Applicability of Canadian Securities Laws and the use of Artificial Intelligence Systems in Capital Markets, which aims to provide clarity and guidance on how securities legislation applies to the use of AI systems by market participants including registrants, non-investment fund reporting issuers, marketplaces, and marketplace participants, clearing agencies and matching service utilities, trade repositories, designated rating organizations, and designated benchmark administrators.
Overview of the Council’s Comments:
The CAC supported a principles-based, tech-neutral approach that fosters innovation while managing risk. Key recommendations included:
Using sandboxes, reviews & notices to stay flexible
- Encouraging firm-led AI governance, not prescriptive rules
- Protecting personal data with strong oversight
- Aligning human oversight with risk & AI use
- Risk-weighted monitoring for complex systems
- Guidance on explainability in high-risk use cases
- Allowing AI in low-risk registrant functions under oversight
- Exploring AI’s role in reducing compliance costs
- Clarifying expectations for third-party AI oversight
- Addressing systemic risks while noting AI’s potential to mitigate them