The rapid adoption of generative artificial intelligence (AI) has revolutionized various industries, and the financial services sector is no exception. As AI usage continues to grow, questions surrounding the regulatory framework for these innovative technologies have come to the forefront. The Financial Industry Regulatory Authority (FINRA) has recently updated its advertising regulation FAQs, providing valuable guidance on how broker-dealers can utilize AI chatbots and approach AI-created communications while maintaining compliance. 

FINRA’s Focus on Investor Protection 

At the core of FINRA’s guidance is a strong emphasis on protecting investors, who are the intended audience for AI chatbots and AI-generated content. Compliance teams should consider this focus as a brightline rule: whenever AI interacts with or impacts investors, whether through chatbots or AI-generated content, the full range of FINRA rules applies. 

Supervision and Compliance Requirements 

FINRA clarifies that the supervision of AI chatbot communications with investors aligns with the existing standards for retail communications, institutional communications, and correspondence under Rule 3110. Firms must ensure that the content shared through AI chatbots undergoes appropriate pre- or post-review, as mandated by relevant regulations. Additionally, AI chatbot content must adhere to the requirements of Rule 2210(d), avoiding any “unwarranted, promissory, or misleading” statements. 

Similarly, AI-generated content is subject to the same supervisory requirements as any other content shared with investors. The review protocols outlined in Rule 3110 and the standards for good faith and fair dealing under Rule 2210(d) apply to AI-generated content, just as they do to human-created content. 

Establishing Policies and Procedures 

To effectively deploy and use AI chatbots and generative AI tools, firms must establish robust policies and procedures. These policies should cover procurement protocols for selecting new AI technologies, implementation considerations, and AI governance, including training, maintenance, and oversight, to ensure compliance with FINRA’s content, supervision, and recordkeeping requirements. 

Compliance teams must consider technical and supervisory controls for overseeing AI capabilities, collaborate with data scientists to validate AI training and testing, and deploy supporting technologies to ensure transparency and facilitate surveillance of AI-assisted interactions. 

Recordkeeping and Content Review 

As AI chatbots and AI-enabled assistants become increasingly integrated into collaboration applications, compliance officers must ensure that these tools are configured with recordkeeping capabilities to capture and retain relevant portions of conversations or interactions, in accordance with FINRA, SEC, and CFTC rules. 

To comply with FINRA Rule 2210 and other regulations for disseminating information to investors, firms may need to enhance their technologies for pre-review of retail communications or post-review of institutional communications and general correspondence. AI-based review technology can assist in analyzing investor content, identifying potential risks, and reviewing content across multiple languages. Crucially, a “human-in-the-loop” approach should be employed to validate the accuracy and validity of risks or issues flagged by machine learning algorithms. 

Embracing AI while Maintaining Compliance 

As the use of AI-powered chatbots and AI-created investor content becomes increasingly prevalent, financial services firms must embrace these tools while making the necessary investments in compliance processes, technologies, and teams. By aligning their practices with FINRA’s expectations, firms can harness the power of AI while maintaining the highest standards of investor protection and regulatory compliance.