FAIRR Act

The Financial Artificial Intelligence Risk Reduction Act directs the Financial Stability Oversight Council to assess how artificial intelligence impacts financial system stability and requires it to submit a report to Congress within 180 days identifying specific threats, regulatory gaps, and recommendations for action. The bill mandates that the Securities and Exchange Commission issue rules requiring major financial entities, such as issuers and brokers, to establish policies and controls that specifically address their use of AI, including governance measures for testing, monitoring, and human oversight. Additionally, it expands regulatory authority over third-party service providers by allowing federal housing finance agencies to examine contractors performing activities on behalf of regulated entities and clarifies that the use of AI does not excuse compliance with existing securities laws.