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    Sep. 24, 2026

Can AI Trading Models Commit Insider Trading?

Fund managers are increasingly deploying large language models and other artificial intelligence (AI) tools capable of accessing and analyzing nonpublic information at unprecedented scale. This trend raises pressing questions about how existing insider trading and material nonpublic information (MNPI) handling rules apply when the entity processing restricted data is not a human analyst but an AI model operating across vast datasets. The stakes are significant. Broker-dealers and investment advisers must maintain policies and procedures reasonably designed to prevent misuse of MNPI, and managers risk regulatory scrutiny if AI tools foreseeably could use restricted data improperly – even absent actual trades. The question is not whether a machine can commit insider trading but whether people and managers have designed AI systems that foreseeably allow MNPI to influence trading or recommendations. This guest article by Skadden partners Daniel Michael and Andrea Griswold examines how the existing securities law framework applies to AI tools that access nonpublic information, identifies regulatory risks beyond traditional insider trading claims and offers practical guidance on controls fund managers can implement now – before AI-specific regulatory developments arrive. For more on other new insider trading issues, see “Managing Prediction Market Insider Trading Risks” (Aug. 13, 2026); and “Insider Trading Enforcement Moves Beyond Equities” (Jul. 16, 2026).

SEC Registration Issues for Non‑U.S. Fund Managers

A fundamental concern for a non‑U.S. manager seeking to enter the U.S. market is whether the manager must register with the SEC as an investment adviser or an exempt reporting adviser. Once those non‑U.S. managers have accessed the U.S. market, they then need to brace for immediate scrutiny from the SEC’s Division of Examinations in its exams of never-before examined advisers (NBE exams). Proper preparation for an NBE exam can help a manager emerge relatively unscathed – with a “no further action” letter or minor deficiency letter – and avoid escalation to a more serious matter. Those issues and others were addressed in an ACA Group webinar on how non‑U.S. fund managers can navigate SEC registration requirements, which featured senior principal consultant Abi Loughnane, managing director Robert Baker and director Michael Beeson. The panelists discussed the private fund and foreign private adviser exemptions to registration under the Investment Advisers Act of 1940; common registration-related pitfalls; what to expect in – and how to prepare for – an initial SEC examination; and the range of potential exam outcomes. This article synthesizes their insights. See our three-part series on exams of non‑U.S. advisers: “The SEC’s Authority and Trends” (Nov. 11, 2021); “U.S. Versus Non‑U.S. Exams and SEC Versus Foreign Regulator Exams” (Nov. 18, 2021); and “Practical Tips for Handling SEC Exams” (Dec. 2, 2021).

SEC Commissioner Peirce Urges Regulatory Restraint in Farewell Remarks

An agency that exercises powers the American people never gave it forfeits the consent on which its legitimacy rests. That conviction ran through the farewell remarks SEC Commissioner Hester M. Peirce delivered on June 9, 2026, at the U.S. Chamber of Commerce Capital Markets Summit in Washington, D.C. After nearly 30 years in Washington, Peirce is leaving the SEC and the city, and she used the occasion to make the case that the government should be “a referee, not a player, on the capital markets field.” Beyond restating first principles, the speech identified unfinished business with direct consequences for fund managers: constitutional doubt about Rule 206(4)‑5 under the Investment Advisers Act of 1940; a change of heart on whether Rule 206(4)-8 can reach merely negligent conduct; criticism of the expansion of Form PF; and the limits the U.S. Supreme Court placed on disgorgement in its June 4, 2026, decision in Sripetch v. SEC. This article distills her remarks. For coverage of prior Peirce speeches, see “SEC Commissioner Peirce Shares Views on Personal Liability for CCOs” (Nov. 5, 2020); “SEC Officials Clarify the Commission’s Stance on ESG Investing and the Role of Disclosure” (Oct. 15, 2020); “SEC Commissioner Peirce Discusses Enforcement Efforts and Reforms” (Feb. 20, 2020); and “The Power of ‘No’: SEC Commissioner Peirce on Enforcement as Last Resort” (Jun. 21, 2018).

Survey Finds AI Is Top Compliance Concern

The overwhelming majority of respondents in the 2026 Investment Management Compliance Testing Report (Report) identified artificial intelligence (AI) as the hottest compliance topic, with firms making significant progress on AI governance. In addition to examining how firms are negotiating the compliance challenges posed by AI, the Report also gauges the state of compliance programs and resources; business continuity plans; preparedness for amended Regulation S‑P; third-party risk management; prediction markets; and social media. As in prior years, the study was co-sponsored by ACA Group (ACA), the Investment Adviser Association and Yuter Compliance Consulting. This article discusses the key findings in the Report, with additional commentary from Aaron Pinnick, senior manager of thought leadership at ACA. See “ACA Compliance Testing Survey: AI and AML Are Now Top Compliance Concerns” (Aug. 28, 2025).

FinCEN, SEC, CFTC and FINRA Assess $125 Million in Fines for Recidivist’s AML Violations

The Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN), SEC, CFTC and FINRA have imposed an aggregate $125 million in civil penalties on UBS Financial Services Inc. (UBSFS) for violations of the anti-money laundering (AML) requirements of the Bank Secrecy Act (BSA) and its implementing regulations. According to the FinCEN consent order (FinCEN Order), covering the period from January 1, 2019, through June 30, 2023, UBSFS had deficient AML policies, procedures and internal controls, which contributed to its failure to monitor tens of thousands of transactions and file suspicious activity reports when required. The penalties are particularly heavy because the firm resolved similar charges in 2018 and failed to complete promised remediation. “Today’s historic action against UBSFS should send a clear message that recidivist financial institutions will face severe repercussions,” said FinCEN Director Andrea Gacki in the press release announcing the resolution. “Repeat violators of the [BSA] jeopardize the integrity of our financial system, especially those that expose it to high-risk customers and activities without effective controls.” This article discusses the key findings in the FinCEN Order and the parallel resolutions with the SEC, CFTC and FINRA. See “Broker-Dealer to Pay $75 Million in Fines for AML Program Violations” (Jun. 18, 2026); and “FinCEN Issues First AML/CFT Priorities” (Aug. 26, 2021).

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