The Financial Industry Regulatory Authority (FINRA) has released updated guidelines for the use of AI chatbots and AI-generated content by broker-dealers, highlighting the importance of investor protection in this rapidly evolving technological landscape.
The Role of AI in Financial Services
As generative artificial intelligence continues to permeate various industries, financial services are no exception. AI tools, including chatbots and content generators, are increasingly being used to enhance investor interactions and streamline communications. However, with these advancements come new regulatory challenges and the need for robust compliance frameworks.
FINRA’s Compliance Guidance
FINRA’s updated FAQs provide crucial compliance guidance for broker-dealers leveraging AI technologies. The main focus is on ensuring that AI-driven communications adhere to the same standards as traditional investor communications. This includes:
Supervision of AI Chatbot Communications:
- AI chatbot interactions with investors must comply with existing FINRA rules for retail and institutional communications as well as correspondence under Rule 3110.
- Content shared via AI chatbots must be pre- or post-reviewed according to regulatory mandates to ensure it does not contain unwarranted, promissory, or misleading statements, in line with Rule 2210(d).
Compliance Requirements for AI-Generated Content:
- AI-generated content must meet the same supervisory standards as human-created content. Firms must follow the review protocols outlined in Rule 3110 and adhere to the standards of good faith and fair dealing under Rule 2210(d).
Establishing AI Policies and Procedures
Firms are advised to establish comprehensive policies and procedures for the deployment and use of AI chatbots. These policies should cover:
- Procurement Protocols: Guidelines for selecting new AI technologies.
- Implementation Considerations: Strategies for integrating AI tools into existing systems.
- AI Governance: Training, maintenance, and oversight of AI technologies to ensure compliance with FINRA rules.
Technical and Supervisory Controls
To minimize risks associated with AI tools, compliance teams should:
- Implement technical and supervisory controls for overseeing AI capabilities.
- Work with data scientists to validate AI training and testing processes.
- Deploy technologies that flag AI participation during or after investor interactions.
- Ensure AI chatbots and tools are configured with recordkeeping capabilities to capture and retain relevant conversations, meeting FINRA, SEC, and CFTC requirements.
Enhancing Compliance with AI Technologies
Firms may need to enhance their technologies for pre-review of retail communications and post-review of institutional communications. Utilizing AI for content vetting can help analyze the context of communications and identify potential risks. However, human oversight remains crucial to validate AI-generated insights and ensure accuracy.
Embracing AI for Compliance Success
As AI-powered chatbots and content generators become more prevalent, embracing these tools and investing in related compliance processes, technologies, and teams will be essential. Aligning with FINRA’s guidelines will help firms navigate the regulatory landscape and protect investors effectively.
Conclusion
FINRA’s updated guidelines underscore the importance of maintaining rigorous compliance standards in the use of AI technologies in financial services. By establishing robust policies, implementing effective controls, and leveraging AI for compliance, firms can ensure they meet regulatory expectations and safeguard investor interests.
