FINRA issues regulatory guidance on members using generative AI tools

Privacy, Cyber Risk & Data Security FINRA Artificial Intelligence

Recently, FINRA reminded member firms that existing rules and guidance apply to the use of artificial intelligence (AI), such as generative AI tools, just as they would with any other technology or other tools. FINRA noted that while generative AI can offer potential benefits, it can also pose risks related to privacy, bias, and misuse. FINRA emphasized that firms must ensure their use of generative AI complies with existing regulations, for example, those governing member supervisory systems for the review of electronic communications and public communications made using a technology tool. The rules applicable will depend on how each firm uses the technology. For example, FINRA noted that if a member firm uses generative AI tools as a part of its supervisory system, “its policies and procedures should address technology governance, including model risk management, data privacy and integrity, reliability and accuracy of the AI model.” FINRA noted it welcomes feedback on how it could update its rules to address the use of generative AI to maintain investor protection and market integrity.