FINRA Issues Report, and Requests Comment, on Use of AI in the Securities Industry

FINRA Issues Report, and Requests Comment, on Use of AI in the Securities Industry

FINRA has issued a paper, “Artificial Intelligence (AI) in the Securities Industry,” that summarizes key findings from FINRA’s recent outreach and research on the use of AI applications. FINRA is encouraging comments on the report, including areas where guidance or modifications to FINRA rules may be desired to support adoption of AI applications; comments are requested to be filed with FINRA by August 31, 2020. The full report can be found here.

The paper covers a wide variety of issues relating to AI and notes that FINRA research “revealed a number of challenges that securities market participants may wish to consider as they explore AI related technology tools” including those relating to issues such as model risk management, data governance, customer privacy and supervisory control systems.  While the paper highlights certain regulatory and implementation areas that broker-dealers may wish to consider as they adopt AI, FINRA notes that it is not endorsing or validating the use or effectiveness of any specific applications discussed and that the report does not cover all applicable regulatory requirements or considerations. FINRA therefore encourages firms to conduct a comprehensive review of all applicable securities laws, rules, and regulations to determine potential implications of implementing AI-based applications.
Please contact us regarding further details regarding the paper.