Finra clarifies guidelines around AI, chatbot communications

Finra has just given more clarity on how it expects investment firms and their agents must handle digitally generated marketing and advertising communications.

The industry self-regulator has updated its guidelines to include items on the use of chatbots and AI in communications with investors.

Through two updates to its Rule 2210 Interpretive Guidance on Friday, it emphasized the need for strict oversight of chatbot interactions and AI-generated content, aligning with existing regulatory frameworks to ensure compliance and prevent misleading communications.

As part of the newly added guidance, Finra clarified how firms should supervise AI-generated chatbot communications that engage with investors.

"Depending on the nature and number of persons receiving the chatbot communications, they may be subject to Finra communications rules as correspondence, retail communications, or institutional communications," the industry regulator stipulated.

The upshot is that a firm using AI technology to create chatbot messaging for investors – the guidance is silent with respect to advisor-facing chatbots – must supervise those communications in line with applicable Finra rules, specifically Rules 2210(a), 2210(b), and 3110(b)(4) and 3110.06 through .09, it said.

Under Rule 3110(b)(4), firms must “establish, maintain, and enforce written procedures for the review of incoming and outgoing written (including electronic) correspondence relating to the firm’s investment banking or securities business.”

Those procedures “must be appropriate for the member’s business, size, structure, and customers," Finra said, adding that the content must adhere to applicable standards such as the ones set out in its Rule 2210(d).

In its second update, Finra addressed how firms should be held accountable for content generated by AI.

The regulator clarified that firms are responsible for ensuring that AI-produced content stays within the same legal and regulatory boundaries as human-generated communications.

“[F]irms must ensure that AI-generated communications they distribute or make available comply with applicable federal securities laws and regulations and FINRA rules,” it said, stating firms must follow applicable supervision requirements, FINRA and SEC recordkeeping requirements.

AI-driven communications must also adhere to certain content standards specified under FINRA Rules 2210 and 2220 and, in the case of funding portals, Rule 200(c), it said.

“These content standards generally require that communications be fair and balanced and prohibit the inclusion of false, misleading, promissory or exaggerated statements or claims,” Finra said