FINRA issues guidance on broker-dealers using AI tools #compliance

FINRA recently issued Regulatory Notice 24-09 discussing the use of artificial intelligence (AI) by broker-dealers, including large language models (LLMs) and other generative AI tools. While AI can offer opportunities for improvement in services and operational efficiencies, FINRA reminded firms that its rules and federal securities laws still apply. AI tools can analyze financial data, summarize documents, and assist in investor education, but concerns about accuracy, privacy, bias, and security must be addressed.

Firms using AI tools must have appropriate supervisory systems and governance in place, whether developed in-house or provided by third parties. Evaluation of AI tools before use to ensure compliance with FINRA rules is also necessary. FINRA may issue further guidance for specific use cases and encourages firms to seek interpretive guidance where rule applications are ambiguous. Ongoing discussions with Risk Monitoring Analysts are recommended.

In conclusion, broker-dealers using AI tools must ensure compliance with FINRA rules and federal securities laws while addressing concerns about accuracy, privacy, bias, and security. Proper governance and evaluation of AI tools are essential, and firms should seek interpretive guidance for ambiguous rule applications. Ongoing discussions with Risk Monitoring Analysts are encouraged to stay informed on regulatory developments.

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