[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9309 Introduced in House (IH)]
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118th CONGRESS
2d Session
H. R. 9309
To provide for regulatory sandboxes that permit certain persons to
experiment with artificial intelligence without expectation of
enforcement actions.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
August 6, 2024
Mr. Hill (for himself and Mr. Torres of New York) introduced the
following bill; which was referred to the Committee on Financial
Services
_______________________________________________________________________
A BILL
To provide for regulatory sandboxes that permit certain persons to
experiment with artificial intelligence without expectation of
enforcement actions.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Unleashing AI Innovation in
Financial Services Act''.
SEC. 2. USE OF ARTIFICIAL INTELLIGENCE BY REGULATED FINANCIAL ENTITIES.
(a) Definitions.--In this section:
(1) AI test project.--The term ``AI test project'' means a
financial product or service that falls under the jurisdiction
of a financial regulatory agency and--
(A) substantially uses artificial intelligence; and
(B) is or may be subject to a Federal regulation or
Federal statute.
(2) Appropriate financial regulatory agency.--The term
``appropriate financial regulatory agency'' means--
(A) the appropriate Federal banking agency, as
defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813);
(B) the Securities and Exchange Commission, with
respect to--
(i) any broker or dealer that is registered
with the Commission under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.),
with respect to the activities of the broker or
dealer that require the broker or dealer to be
registered under that Act;
(ii) any investment company that is
registered with the Commission under the
Investment Company Act of 1940 (15 U.S.C. 80a-1
et seq.), with respect to the activities of the
investment company that require the investment
company to be registered under that Act;
(iii) any investment adviser that is
registered with the Commission under the
Investment Advisers Act of 1940 (15 U.S.C. 80b-
1 et seq.), with respect to the investment
advisory activities of such company and
activities that are incidental to such advisory
activities;
(iv) any clearing agency registered with
the Commission under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.), with
respect to the activities of the clearing
agency that require the agency to be registered
under such Act;
(v) any nationally recognized statistical
rating organization registered with the
Commission under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.);
(vi) any transfer agent registered with the
Commission under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.);
(vii) any exchange registered as a national
securities exchange with the Commission under
the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.);
(viii) any national securities association
registered with the Commission under the
Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.);
(ix) any securities information processor
registered with the Commission under the
Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.);
(x) the Municipal Securities Rulemaking
Board established under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.);
(xi) the Public Company Accounting
Oversight Board established under the Sarbanes-
Oxley Act of 2002 (15 U.S.C. 7211 et seq.);
(xii) the Securities Investor Protection
Corporation established under the Securities
Investor Protection Act of 1970 (15 U.S.C.
78aaa et seq.); and
(xiii) any security-based swap execution
facility, security-based swap data repository,
security-based swap dealer or major security-
based swap participant registered with the
Commission under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.), with respect to
the security-based swap activities of the
person that require such person to be
registered under such Act;
(C) the Bureau of Consumer Financial Protection,
with respect to a covered person, as defined in section
1002 of the Consumer Financial Protection Act of 2010
(12 U.S.C. 5481), that is not described in subparagraph
(A), (B), (D), or (E);
(D) the National Credit Union Administration, with
respect to an insured credit union; and
(E) the Federal Housing Finance Agency, with
respect to Federal Home Loan Banks or the Federal Home
Loan Bank System, and with respect to the Federal
National Mortgage Association or the Federal Home Loan
Mortgage Corporation.
(3) Artificial intelligence.--The term ``artificial
intelligence'' has the meaning given the term in section 5002
of the National Artificial Intelligence Initiative Act of 2020
(15 U.S.C. 9401).
(4) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(5) Federal securities laws.--The term ``Federal securities
laws'' means--
(A) the Securities Act of 1933 (15 U.S.C. 77a et
seq.);
(B) the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.);
(C) the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201
et seq.);
(D) the Trust Indenture Act of 1939 (15 U.S.C.
77aaa et seq.);
(E) the Investment Company Act of 1940 (15 U.S.C.
80a-1 et seq.);
(F) the Investment Advisers Act of 1940 (15 U.S.C.
80b-1 et seq.); and
(G) the Jumpstart Our Business Startup Act (Public
Law 112-106; 126 Stat. 306).
(6) Financial product or service.--The term ``financial
product or service''--
(A) has the meaning given the term in section 1002
of the Consumer Financial Protection Act of 2010 (12
U.S.C. 5481);
(B) includes--
(i) activities that are financial in
nature, as defined in section 4(k)(4) of the
Bank Holding Company Act of 1956 (12 U.S.C.
1843(k)(4));
(ii) any financial product or service
provided by a person regulated by the
Commission, as defined in 1002 of the Consumer
Financial Protection Act of 2010 (12 U.S.C.
5481); and
(iii) includes the offer or sale of any
security subject to the Federal securities
laws; and
(C) does not include the business of insurance.
(7) Financial regulatory agency.--The term ``financial
regulatory agency'' means--
(A) the Board of Governors of the Federal Reserve
System;
(B) the Federal Deposit Insurance Corporation;
(C) the Office of the Comptroller of the Currency;
(D) the Securities and Exchange Commission;
(E) the Bureau of Consumer Financial Protection;
(F) the National Credit Union Administration; and
(G) the Federal Housing Finance Agency.
(8) Regulated entity.--The term ``regulated entity'' means
an entity regulated by any financial regulatory agency.
(b) Regulatory Sandboxes.--
(1) Establishment.--Each financial regulatory agency shall
establish a regulatory sandbox that allows regulated entities
to experiment with AI test projects without unnecessary or
unduly burdensome regulation or expectation of retroactive
enforcement actions.
(2) Applications.--
(A) Submission.--
(i) In general.--A regulated entity may
submit to the appropriate financial regulatory
agency an application, on a form determined by
the appropriate financial regulatory agency, to
engage in an AI test project.
(ii) Contents.--An application submitted
under clause (i) shall include--
(I) a description of the AI test
project proposed to be carried out by
the regulated entity;
(II) an alternative compliance
strategy that--
(aa) identifies a
regulation issued by the
appropriate financial
regulatory agency or a Federal
statute enforced by the
appropriate financial
regulatory agency that the
regulated entity requests to be
waived or modified; and
(bb) proposes an
alternative method for the
regulated entity to comply with
the regulation or statute,
including an explanation as to
why the alternative method is
essential to the operation of
the entity;
(III) a demonstration that, under
the strategy described in subclause
(I), the AI test project--
(aa) would serve the public
interest, improve consumer
access to a financial product
or service, or promote consumer
protection;
(bb) would enhance
efficiency or operations,
foster innovation or
competitiveness, improve risk
management and security, or
enhance regulatory compliance;
(cc) would not present a
systemic risk to the financial
system of the United States;
(dd) is consistent with the
purposes of the anti-money
laundering and countering the
financing of terrorism
obligations under subchapter II
of chapter 53 of title 31,
United States Code; and
(ee) would not present a
national security risk to the
United States;
(IV) a proposed date on which the
AI test project would terminate and an
explanation of why such termination
date would be appropriate;
(V) proposed limitations on the
size, scope, and growth of the AI test
project; and
(VI) an estimate of the economic
impact of the AI test project if
approved.
(iii) Joint applications.--Two or more
regulated entities may submit a joint
application to the same financial regulatory
agency under clause (i).
(iv) Regulations and statutes of other
agencies.--
(I) In general.--A regulated entity
may submit an application under this
subparagraph that includes an
alternative compliance strategy for a
regulation issued by or a Federal
statute enforced by a financial
regulatory agency that is not the
appropriate financial regulatory agency
for the regulated entity.
(II) Requirements.--An application
described in subclause (I) shall be
subject to the same requirements as an
application described in clause (ii),
except that--
(aa) the regulated entity
shall submit the application to
the appropriate financial
regulatory agency and the
financial regulatory agency
that issued the regulation or
enforces the statute or
regulation that is the subject
of the alternative compliance
strategy; and
(bb) the AI test project
may not take effect unless the
appropriate financial
regulatory agency and any other
financial regulatory agency
that issued the regulation or
enforces the statute that is
the subject of the alternative
compliance strategy jointly
approve the application using
the process described in
subparagraph (B).
(v) Notice.--A regulated entity that is
regulated or supervised by more than 1
financial regulatory agency shall provide
notice of any application submitted to the
appropriate financial regulatory agency under
this section to each financial regulatory
agency by which it is regulated or supervised
not later than 5 business days after the entity
submits the application to the appropriate
financial regulatory agency.
(B) Agency review.--
(i) In general.--Except as provided in
clause (v), not later than 90 days after the
date on which an application is submitted to
the appropriate financial regulatory agency
under subparagraph (A), the appropriate
financial regulatory agency shall--
(I) review the application; and
(II) submit to the applicant in
writing a determination of the agency.
(ii) Approval.--
(I) In general.--If the applicant
shows that it is more likely than not
that the application meets the
requirements for establishing an
alternative compliance strategy and
meets the requirements described in
subparagraph (A)(ii)(II), the agency
shall approve the application and
notify the applicant in writing of--
(aa) the regulation or
Federal statute that is the
subject of the alternative
compliance strategy;
(bb) the terms of the
alternative compliance strategy
for the AI test project;
(cc) the date on which the
AI test project will terminate;
(dd) any limitations on the
size, scope, or growth of the
AI test project; and
(ee) any additional
limitations or conditions on
the AI test project, as
determined by the appropriate
financial regulatory agency.
(II) Effect of approval.--Except as
provided in subclause (III), beginning
on the date on which an application
submitted under subparagraph (A) is
approved and ending on the date
described in subclause (I)(cc)--
(aa) the appropriate
financial regulatory agency may
enforce a regulation or Federal
statute described in subclause
(I)(aa) only in the manner set
out in the alternative
compliance strategy described
in subclause (I)(bb); and
(bb) a financial regulatory
agency that is not the
appropriate financial
regulatory agency may not
enforce a regulation or Federal
statute described in subclause
(I)(aa) with respect to the
conduct of the AI test project
by the regulated entity.
(III) Enforcement by another
financial regulatory agency.--A
financial regulatory agency other than
the appropriate financial regulatory
agency that approves an application
under subparagraph (A)(iv) may enforce
a regulation or Federal statute
described in subclause (I)(aa) if the
alternative compliance strategy
described in subclause (I)(bb) provides
for enforcement by such financial
regulatory agency.
(IV) Rule of construction.--Nothing
in this clause may be construed to
limit the authority of a financial
regulatory agency to take an
enforcement action against a regulatory
entity with respect to fraud relating
to an AI test project.
(iii) Denial.--
(I) In general.--If an agency
denies an application submitted under
subparagraph (A), the agency--
(aa) shall submit to the
applicant a written notice
explaining the reason for
denial, including evidence that
the applicant did not satisfy
the requirements for
establishing an alternative
compliance strategy and the
baseline used by the agency to
measure the likely economic
consequences of rejecting the
application; and
(bb) may not take an
enforcement action against the
applicant earlier than the date
that is 30 days after the date
on which the agency submits the
written notice described in
item (aa).
(II) Resubmittals.--Each time an
application submitted under
subparagraph (A) is denied, the
regulated entity may submit another
application if the application is not
substantially similar to the one
denied.
(III) Injunctive relief.--If a
financial regulatory agency determines
an AI test project presents an
immediate danger to consumers or
presents a risk to financial markets,
the agency may file a civil action in
an appropriate court seeking to enjoin
such project.
(IV) Rule of construction.--Nothing
in this clause may be construed to
limit the authority of a financial
regulatory agency to take an
enforcement action against an applicant
with respect to fraud relating to the
AI test project.
(iv) Extension.--If the financial
regulatory agency needs additional time, the
agency may vote to extend the application
deadline by 90 days. After the expiration of
the 90-day period, if the agency has not made a
determination on the application, the
application will automatically be deemed
approved and effective.
(C) Data security.--All data supplied by sponsors
of AI test projects submitted under this section shall
be stored in a secure manner.
(D) Regulations.--Not later than 180 days after the
date of enactment of this Act, each financial
regulatory agency shall promulgate regulations that--
(i) shall be published in the Federal
Register and provide a 45-day period for public
notice and comment; and
(ii) include--
(I) procedures for modifying the AI
test projects that are approved by the
agency;
(II) consequences for failure to
comply with set terms;
(III) termination dates not earlier
than 1 year after the date on which AI
test projects are approved;
(IV) procedures to extend the
termination date described in subclause
(III);
(V) procedures for confidentiality;
and
(VI) procedures for coordinating
decisions relating to applications
submitted jointly by multiple regulated
entities or applications submitted to
more than one financial regulatory
agency.
(c) Report.--Each financial regulatory agency shall submit to the
Committee on Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of Representatives an
annual report on the outcomes of AI test projects.
(d) Regulations.--After approving not fewer than 1 AI test project,
a financial regulatory agency may promulgate regulations, after
providing a notice and an opportunity for public comment, establishing
other AI activities or products that qualify as AI test projects.
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