The financial industry is undergoing a transformative shift as artificial intelligence (AI) becomes an integral part of securities promotion. For broker-dealers eager to harness the power of AI for marketing, investor outreach, and client engagement, understanding and navigating the regulatory landscape is crucial. The challenges posed by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) can seem daunting, but with the right knowledge and strategies, firms can leverage AI while remaining compliant. 

The Role of Broker-Dealers in Securities Promotion 

Broker-dealers are crucial intermediaries in the securities market, facilitating client transactions and promoting securities offerings under strict regulations to protect investors from fraud. As they adopt AI-driven marketing strategies—like social media engagement, email outreach, and chatbots—they must ensure compliance with existing regulations. 

Although there are no specific AI regulations from FINRA or the SEC, current rules on communications, supervision, vendor management, and recordkeeping apply to AI-generated content. This blog outlines key regulatory considerations for broker-dealers using AI in their marketing efforts 

Key Regulatory Considerations for AI-Driven Securities Promotion 

1. Communications with the Public (FINRA Rule 2210)

AI-generated content, including social media posts and emails, must adhere to FINRA’s communication standards. Rule 2210 mandates that all promotional materials be fair, balanced, and not misleading. If AI-generated promotions reach more than 25 retail investors within 30 days, they are classified as retail communications, triggering strict review and approval processes. 

2. Supervision and Oversight (FINRA Rule 3110)

Broker-dealers are required to supervise all aspects of their business, including AI-driven marketing activities. AI systems should be treated like human employees, necessitating strict compliance monitoring. 

3. Third-Party Vendor Management (FINRA Notice 24-09)

Many broker-dealers engage third-party AI vendors for marketing automation. However, firms cannot outsource their compliance responsibilities. 

4. Social Media and Digital Communications (FINRA Notice 17-18)

AI-driven engagement on social media must comply with FINRA’s standards for digital communication. Broker-dealers must monitor and retain all AI-generated interactions. 

5. AI Model Risk Management (FINRA’s Artificial Intelligence in the Securities Industry Report)

FINRA’s report highlights potential compliance risks associated with AI, including biased outputs and misleading claims. 

6. Recordkeeping Requirements (SEC Rule 17a-4)

Broker-dealers must retain all business-related communications for at least three years, including AI-generated marketing content. 

Balancing Innovation with Compliance 

AI-driven securities promotion presents exciting opportunities for broker-dealers, but compliance with regulatory frameworks is essential. Firms must adopt robust supervisory mechanisms, implement clear policies, and maintain detailed records to navigate this evolving landscape confidently. By integrating compliance into their AI-driven strategies, broker-dealers can leverage the efficiency of AI while minimizing regulatory risks.