SEC Official Says Investment Advisors Can Use AI For Proxy Votes

Investment advisers can use artificial intelligence to help them make proxy voting decisions, a Securities and Exchange Commission official said.

“As advisers grapple with the scale and complexity of proxy voting — especially across large portfolios — AI tools like large language models and agentic AI, offer a compelling opportunity,” Brian Daly, director of the Division of Investment Management, said Thursday in prepared remarks for a New York City Bar Association event.

AI models that can not only advise but also execute their recommendations shouldn’t be used to replace human judgment, Daly said. He noted in his speech that he was speaking only on his own behalf and not for commissioners or staff.

The comments mark a pivot away from former SEC Chair Gary Gensler’s far more cautious view on AI. The Biden-era regulator frequently warned about the risks of concentration among AI providers that could introduce systemic risk or harmful outcomes if too many firms relied on companies using the same underlying data.

Daly’s remarks came as part of a broader speech outlining greater permissiveness in how investment advisers make proxy voting decisions. For example, he said investment advisors can make their own decisions on whether to vote on certain proxy proposals or whether to even engage a proxy advisor at all.

“Investment advisers that determine proxy voting is not required by, or may even be inconsistent with, their investment program should not be afraid to take that position,” he said.

The SEC is still considering how to act on President Donald Trump’s recent executive order that would impose significantly more requirements on proxy advisers, which is an industry dominated by Glass Lewis & Co. and Institutional Shareholder Services Inc. Those firms make recommendations to investors and asset managers about how to vote but opponents have argued they exercise out-sized influence over corporate actions.

The executive order asked the SEC to consider whether proxy advisors should have to register with the agency as investment advisers, which would significantly increase compliance costs. It also asked the agency to decide whether voting recommendations on matters involving social or environmental issues would violate investment advisers’ fiduciary duties, potentially opening them up to lawsuits if they did follow the recommendations.

“Stay tuned,” Daly said of the effort, which he described as a “big assignment.”