The Financial Industry Regulatory Authority (FINRA) reminds its member firms that FINRA’s rules – which are intended to be technology neutral – and securities laws generally, still apply when member firms use Gen AI or similar technologies during their work. just as they apply when member companies use any other technology or tool.
FINRA intends its rules and guidelines to be technology neutral and to work dynamically with developments in the technology and processes of member firms. The rules apply when member companies use artificial intelligence, including Gen AI or similar technologies, in the context of their business, just as they apply when member companies use any other technology or tool.
For example, under Rule 3110 (Supervision), a member firm must have a reasonably designed system of supervision tailored to its activities. If a company uses Gen AI tools as part of its supervisory system—to review email, for example—its policies and procedures should address the governance of the technology, including model risk management, privacy and integrity data, the reliability and accuracy of the AI model.
In addition, FINRA’s rules apply whether member firms directly develop Gen AI tools for their own use or when they leverage third-party technology, including through integrated functionality in existing third-party products.
As with any technology or tool, a member firm should evaluate Gen AI tools before deploying them and ensure that the member firm can continue to comply with applicable FINRA rules applicable to the business use of these tools. The rules applicable to the use of Gen AI will depend on how a member firm develops the technology, and FINRA will consider issuing further guidance on how to apply specific rules in relation 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 tool or a technological tool, and this guidance addresses the specific application of the rules to certain generated from AI transmissions. Depending on the ways in which a member company may use Gen AI, such use could implicate almost any area of a member company’s regulatory obligations.
FINRA notes that this area is rapidly evolving and member firms continue to consider Gen AI use cases. As they do so, FINRA stands ready to work with member firms and other interested parties on the potential supervisory and compliance implications.