The European Securities and Markets Authority (ESMA), the EU's top financial regulator, has issued a stern warning to banks and investment firms, mandating that they prioritize client interests when utilizing artificial intelligence (AI) tools. This directive reinforces accountability under the Markets in Financial Instruments Directive (MiFID) securities law.

In a public statement released on May 30, ESMA outlined the guidelines for AI usage in financial services within the European Union (EU). The statement highlights the transformative potential of AI in retail investment services, but also emphasizes the significant impact on financial institutions' behavior and retail investor protection.

ESMA stressed that firms' decisions, whether made by humans or AI tools, remain the responsibility of management bodies. As AI is increasingly employed in investment services, firms must demonstrate an "unwavering commitment" to acting in the best interests of their clients, regardless of the AI tools used. This applies to both in-house developed and third-party AI services, including generative AI chatbots like ChatGPT and Gemini.

This directive aligns with the EU's proactive approach to AI regulation, having recently passed the world's first comprehensive set of AI regulations. Additionally, the EU has been exploring AI-related initiatives, such as utilizing supercomputers to boost the region's AI ecosystem and support startups. A recent report by the European Blockchain Observatory and Forum (EUBOF) also highlighted the potential of blockchain and AI integrations to drive local innovation, particularly in sectors like healthcare and finance where data security is paramount.

By emphasizing client priority in AI adoption, ESMA aims to ensure that financial institutions harness the benefits of AI while upholding their responsibility to protect consumers.