AI Increasingly Part of Disclosures for Securities Law Purposes

Companies considering IPOs may want to note that disclosing the use of, risks posed by, and opportunities created by AI may be increasingly important. More and more companies identify AI as having the potential to cause material issues in their business (such as if AI tools make faulty decisions that lead to bad business outcomes). As noted in the linked article, AI has been mentioned more than 1,000 times a month in SEC filings made since November 2022. 

Why It Matters

Evaluating whether AI poses risks, and how material those risks are, to a company's business is a complex question with technological, commercial, and legal aspects. We are entering an interesting new era: investing risks will be increasingly tied to non-natural (and non-manmade!) events, and regulators will be just as attuned to issues posed by AI as they are to more familiar business risks such as natural disasters, labor disputes, or unsafe product design.