The Financial Industry Regulatory Authority (FINRA) reminds its member firms that FINRA’s rules–which are intended to be technology neutral–and the securities laws more generally, continue to apply when member firms use Gen AI or similar technologies in the course of their businesses, just as they apply when member firms use any other technology or tool.
FINRA intends for its rules and guidance to be technologically neutral and to function dynamically with evolutions in technology and member firms’ processes. The rules apply when member firms use AI, including Gen AI or similar technologies, in the course of their business, just as they apply when member firms use any other technology or tool.
For example, pursuant to Rule 3110 (Supervision), a member firm must have a reasonably designed supervisory system tailored to its business. If a firm is using Gen AI tools as part of its supervisory system—for the review of electronic correspondence, for instance—its policies and procedures should address technology governance, including model risk management, data privacy and integrity, reliability and accuracy of the AI model.
Moreover, FINRA rules apply whether member firms are directly developing Gen AI tools for their proprietary use or when leveraging the technology of a third party, including through embedded features in existing third-party products.
As with any technology or tool, a member firm should evaluate Gen AI tools prior to deploying them and ensure that the member firm can continue to comply with existing FINRA rules applicable to the business use of those tools. The rules applicable to Gen AI use will depend on how a member firm deploys the technology, and FINRA will consider issuing further guidance on how particular rules may apply with respect to specific use cases.
For example, FINRA has provided guidance that the content standards of Rule 2210 (Communications with the Public) apply whether member firms’ communications are generated by a human or technology tool, and that guidance discusses the specific application of the rules to certain AI-generated communications. Depending on the ways in which a member firm may use Gen AI, such use could implicate virtually every area of a member firm’s regulatory obligations.
FINRA notes that this area is rapidly evolving, and member firms are continuing to consider Gen AI use cases. As they do so, FINRA stands ready to engage with member firms and other interested parties on the potential supervisory and compliance implications.
