AI and the Financial Markets: Accountability and Risk Management with Legal Tools

In the financial markets, advanced artificial intelligence (AI) is used, for example, in algorithmic trading in financial instruments, and in credit assessment to see whether someone is eligible for a loan. AI has many advantages, such as superior efficiency and lower costs. But letting advanced algorithms manage financial decisions also entails risks.

Today, there is immense uncertainty about who is legally accountable for decisions taken by an AI and their implications for human beings and companies. Existing rules are extremely diverse in nature, and have varying purposes. What is more, legislation that keeps up with technological development is essentially unattainable.

Players involved in the financial markets therefore need to act on their own. Their aim is to proactively manage their own accountability and the risks associated with AI. Some of the methods of managing risks and accountabilities are legal in nature.

In the project, the researchers will study, above all, how the players seek to distribute risks and accountabilities through their own assorted agreements and contracts – with AI programmers, customers, insurance companies and so forth. In addition, the researchers will study the overall “infrastructure of accountability” laid down in the legislation, one reason being to see which gaps most urgently need to be closed.

Within the project, the researchers will present, first, analyses of existing legislation and common contractual solutions and, second, the planned functions of the statutory and legal provisions, as well as how they actually work. They will also propose improvements. The analyses and proposals will be useful both to the companies and to the customers in the financial markets, and valuable for work on new legislation.

The researchers also hope to be able to appraise the dual approach, combining social science theory and legal techniques, to study accountability and risk management in particular. This may be rewarding for future research at the interface between law and social sciences.

Principal investigator: Magnus Strand, Associate professor of European law, Senior lecturer in commercial law, Dept. of Business Studies, Uppsala University

Project members:
Annina H Persson, Professor of private law at Örebro University, visiting Professor of commercial law at Uppsala University
Malou Larsson Klevhill, Associate professor of private law, Senior lecturer in commercial law at Uppsala University
Johanna Chamberlain, PhD student at Department of Law, Uppsala University
Andreas Kotsios, PhD student at Department of Law, Uppsala University

1 January 2021 until 31 December 2023
Funding
Marianne and Marcus Wallenberg Foundation