FINRA’s rules are intended to be technologically neutral. They apply when companies use GenAI or similar technologies in their businesses, just as they apply when companies use any other technology or tool. But what does that mean for a compliance professional using GenAI?
Generative artificial intelligence has moved from experiment to enterprise tool with remarkable speed. In the FINRA 2026 Annual Regulatory Oversight Report, FINRA makes clear that GenAI is no longer a future consideration. In a new section of the report entitled GenAI: Continuing and Emerging Trends, FINRA notes that oversight of GenAI is a present-day supervisory obligation. For corporate compliance professionals, the message is straightforward and uncompromising: the use of GenAI does not change regulatory expectations, but it does change how firms must meet them.
FINRA begins from a principle that compliance officers should welcome rather than fear: regulatory requirements are technology-neutral. FINRA rules and the federal securities laws apply to GenAI exactly as they apply to any other technology deployed in the business. That neutrality, however, does not reduce risk. Instead, it places responsibility squarely on firms to understand how GenAI affects supervision, communications, recordkeeping, and fair dealing.
This is where many organizations will struggle. GenAI promises efficiency, scale, and speed, but those same attributes can amplify compliance failures just as easily as they enhance compliance performance.
Where Firms Are Using GenAI Today
FINRA’s observations show that firms are adopting GenAI primarily for internal efficiency. The most common use case is summarization and information extraction, particularly for large volumes of unstructured documents. Compliance teams recognize the value immediately. Policies, procedures, regulatory guidance, contracts, and internal reports can be reviewed faster and more consistently than ever before.
That efficiency gain is real, but it comes with a caveat. If a compliance function relies on GenAI outputs, the firm must ensure that those outputs are accurate, reliable, and fit for purpose. A hallucinated regulatory interpretation or an outdated rule summary is not a harmless mistake. It is a compliance failure waiting to happen.
FINRA highlights two persistent GenAI risks that compliance officers must address head-on: hallucinations and bias. Hallucinations occur when models generate confident but incorrect information. Bias arises when training data or model design skews outputs in ways that undermine fairness or accuracy. Both risks directly implicate supervisory obligations, particularly under FINRA Rule 3110, which requires reasonably designed supervisory systems tailored to a firm’s business.
Governance Is Not Optional
One of the most important signals in FINRA’s guidance is its emphasis on governance. Firms are expected to implement formal review and approval processes before deploying GenAI tools. That means compliance cannot be brought in after the fact. Compliance must be part of the design, testing, and approval process from the beginning.
FINRA explicitly points to the need for governance or model risk management frameworks that establish clear policies for the development, implementation, use, and monitoring of GenAI. Documentation is not a nice-to-have. It is central to defensibility. Regulators will expect firms to show not only what a model does, but why it was chosen, how it was tested, and how it is monitored over time.
Testing and monitoring are recurring themes. Firms should test GenAI for privacy, integrity, reliability, and accuracy before deployment. After deployment, firms should monitor prompts, outputs, and model performance on an ongoing basis. Logging prompts and outputs, tracking model versions, and maintaining human-in-the-loop review processes are no longer best practices. They are emerging regulatory expectations.
The Next Frontier: AI Agents
Perhaps the most consequential discussion this section involves AI agents. These systems can autonomously plan, decide, and act to achieve objectives without predefined logic. For compliance professionals, this is where risk accelerates.
FINRA identifies several agent-specific risks that should command immediate attention. Autonomous decision-making without human validation raises obvious concerns. Agents may act beyond their intended authority. Multi-step reasoning processes can undermine auditability and transparency. Sensitive data may be mishandled. General-purpose agents may lack the domain expertise necessary for regulated environments.
The lesson here is not to avoid AI agents entirely. It is to recognize that autonomy demands stronger controls. Human oversight, clear guardrails, system access limitations, and detailed tracking of agent actions are essential. Compliance professionals should assume that regulators will scrutinize agent behavior closely, particularly when it affects customers, markets, or regulatory obligations.
What This Means for Compliance Leaders
FINRA’s guidance signals a broader shift in regulatory thinking. Regulators are not asking whether firms use GenAI. They are asking how well firms govern it. Compliance leaders must move from reactive policy drafting to proactive system design.
This is a moment for compliance to lead. By embedding governance, testing, monitoring, and documentation into GenAI initiatives, compliance functions can enable innovation while protecting the organization. Firms that treat GenAI as a shortcut will find themselves explaining failures. Firms that treat GenAI as a regulated capability will be better positioned to defend decisions and outcomes.
The bottom line is simple. GenAI does not replace compliance judgment. It magnifies it. FINRA has drawn the roadmap. It is now up to compliance professionals to follow it with discipline, structure, and foresight. It should be a key consideration for you as we move into 2026.
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