Key Takeaways
- • MFA submitted a comment letter to the Financial Stability Board urging revision of proposed AI sound practices to remain flexible, principles-based, and proportionate across the financial sector rather than defaulting to large-bank requirements.
- • The FSB's current framework is structurally designed around systemically important financial institutions, creating disproportionate compliance costs that could exclude smaller alternative asset managers from responsible AI adoption.
- • Alternative asset managers operate with different business models, risk profiles, and resource constraints than large banks; a one-size-fits-all regulatory approach risks stifling innovation and limiting AI's benefits to investors and markets.
- • MFA Chief Advocacy Officer Jillien Flores emphasized that a proportionate framework building on existing industry risk management practices would enable firms of all sizes to deliver AI's benefits while maintaining appropriate safeguards.
- • Static, bank-centric AI guidance could reduce competitive participation in AI innovation across the financial sector, potentially concentrating adoption advantages among large institutions with compliance infrastructure already in place.
Summary
The Managed Funds Association (MFA) has formally urged the Financial Stability Board to revise its proposed sound practices for artificial intelligence adoption in the financial sector, arguing that the current framework risks creating barriers for smaller institutions. In a comment letter submitted on July 23, 2026, MFA cautioned that guidance structured around large, systemically important financial institutions could inadvertently limit responsible AI adoption across the broader financial ecosystem and stifle innovation.
MFA supports the FSB's overarching objective of promoting responsible AI use but warns that the rapid evolution of AI practices demands a flexible rather than prescriptive regulatory approach. The organization's core concern centers on proportionality: the proposed sound practices are predominantly designed around the operational structures and resource availability of the largest banks, which may not align with the business models, risk profiles, or team sizes of alternative asset managers and other non-bank financial institutions.
According to Jillien Flores, MFA's Chief Advocacy Officer, applying a bank-centric compliance model across the entire financial sector risks making AI adoption prohibitively expensive for many firms. "The FSB's AI sound practices need to work for the entire financial sector, not exclusively tuned to the resources and practices of the largest banks," Flores stated. A proportionate, flexible framework that builds on existing industry risk management practices and duties of care would enable firms of all sizes to responsibly implement AI while maintaining appropriate governance standards.
MFA's position highlights a fundamental tension in financial regulation: prescriptive rules designed for systemic risk at large institutions may create unintended consequences by concentrating AI adoption advantages among institutions with existing compliance infrastructure. A flexible, principles-based framework would allow firms across the financial sector to deploy AI with risk management appropriate to their scale and business model, thereby expanding AI's benefits to investors, markets, and the broader economy rather than restricting them to large financial institutions.
MFA supports the FSB's overarching objective of promoting responsible AI use but warns that the rapid evolution of AI practices demands a flexible rather than prescriptive regulatory approach. The organization's core concern centers on proportionality: the proposed sound practices are predominantly designed around the operational structures and resource availability of the largest banks, which may not align with the business models, risk profiles, or team sizes of alternative asset managers and other non-bank financial institutions.
According to Jillien Flores, MFA's Chief Advocacy Officer, applying a bank-centric compliance model across the entire financial sector risks making AI adoption prohibitively expensive for many firms. "The FSB's AI sound practices need to work for the entire financial sector, not exclusively tuned to the resources and practices of the largest banks," Flores stated. A proportionate, flexible framework that builds on existing industry risk management practices and duties of care would enable firms of all sizes to responsibly implement AI while maintaining appropriate governance standards.
MFA's position highlights a fundamental tension in financial regulation: prescriptive rules designed for systemic risk at large institutions may create unintended consequences by concentrating AI adoption advantages among institutions with existing compliance infrastructure. A flexible, principles-based framework would allow firms across the financial sector to deploy AI with risk management appropriate to their scale and business model, thereby expanding AI's benefits to investors, markets, and the broader economy rather than restricting them to large financial institutions.
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