{"id":798958,"date":"2026-05-15T20:23:18","date_gmt":"2026-05-15T20:23:18","guid":{"rendered":"https:\/\/www.europesays.com\/us\/798958\/"},"modified":"2026-05-15T20:23:18","modified_gmt":"2026-05-15T20:23:18","slug":"ai-compliance-lags-as-demand-outpaces-regulatory-action","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/798958\/","title":{"rendered":"AI Compliance Lags as Demand Outpaces Regulatory Action"},"content":{"rendered":"

Advancements and interest in artificial intelligence are moving so quickly that compliance officers worry the demand \u201cis going to force regulators to come around as opposed to getting ahead of it.\u201d<\/p>\n

During a discussion at the Financial Industry Regulatory Authority\u2019s annual conference in Washington, D.C., Dan Gallagher, the chief legal, compliance and corporate affairs officer of Robinhood Markets (and a FINRA Board of Governors member), said customers\u2019 use of generative AI tools in investment decisions could run afoul of a host of securities regulations.<\/p>\n

However, as of yet, regulators haven\u2019t caught up, Gallagher warned, particularly on how firms can build their own AI-supported tools that clients can use to make investment decisions.<\/p>\n

\u201cI\u2019m not saying FINRA says no or the SEC says no, but if you read the rules, it\u2019s mildly incongruous,\u201d Gallagher said. \u201cSo we\u2019ve got to get past that and get past that quickly, because sending American investors off into third-party sources to get investment advice to do the things they want to do in their brokerage app on the website is not good policy.\u201d<\/p>\n

Related:FINRA Board Weighs Pulling Back Fee Increases<\/a><\/p>\n

The conversation with Gallagher and other compliance leaders came at the end of a regulatory-focused conference dominated by conversations about AI, including the benefits and challenges it poses for firms\u2019 compliance departments.\u00a0<\/p>\n

Many firms are already deploying their own AI assistants for advisors, and Anthropic announced earlier this year that\u00a0it had expanded Claude \u201cplug-ins\u201d<\/a>\u00a0for wealth managers, investment bankers, equity research and private equity firms.\u00a0But Gallagher warned that clients are looking to AI to tell them what to do (and, in some cases, do it for them), and building (or bringing) such tools into firms could conflict with SEC rules, including Regulation Best Interest and Regulation S-P.\u00a0<\/p>\n

Nevertheless, Gallagher said it could be preferable for those AI-assisted trades to be done within the firm, raising the question of whether it\u2019s preferable for those kinds of AI-powered suggestions (and trades) to come from inside the house.<\/p>\n

\u201cWhy have them go do it with a third party when you can build it internally in a walled garden that\u2019s more protected, where there\u2019s better data, and quite frankly, where it\u2019s not scraping Reddit for what it\u2019s going to recommend to you? It\u2019s actually using your own data,\u201d Gallagher said. \u201cBut right now, we sit here, and Claude can do it and I can\u2019t, on its face.\u201d<\/p>\n

For FINRA, the main challenge is determining where regulatory intervention may be needed, and where AI compliance can rely upon existing rules, according to Executive Vice President and Chief of Staff Nathaniel Stankard. He said regulators and industry alike were in a \u201ctransition\u201d phase after the shock of ChatGPT and similar models hitting the general populace.<\/p>\n

Related:Atkins Says SEC Can ‘Fill in the Gaps’ Without Crypto Bill, but Worries About ‘Future Proofing’<\/a><\/p>\n

\u201cFrom a regulatory standpoint, you want to say, \u2018All right, let\u2019s not stymie innovation. Let\u2019s take our time, let\u2019s learn what the users are,\u2019\u201d Stankard said.\u00a0 \u201cAnd now we\u2019re hitting a level of maturation and expansion where I think that, from a regulatory perspective, we want to understand where it\u2019s actually productive to engage where we need to, whether it\u2019s to protect investors or protect funds.\u201d<\/p>\n

According to Wendy Lanton, a chief operations and compliance officer for the N.Y.-based Herold & Lantern Investments, AI compliance is particularly challenging for smaller firms.\u00a0<\/p>\n

Lanton (who is also a small-firm representative on FINRA\u2019s Board of Governors) said the technology requirements for effective oversight can make it harder to find the most effective solution.<\/p>\n

\u201cI find that there might be many solutions out there, and as a small firm, you can\u2019t build it yourself. You need a vendor,\u201d she said. \u201cAnd so you say, \u2018okay, well this vendor has this, and this vendor has that.\u2019 Now, I\u2019ve got 10 vendors: A, I can\u2019t afford it, and B, I can\u2019t manage the relationships.\u201d<\/p>\n

Related:Robinhood Wins Form CRS Relief from SEC on Trump Accounts<\/a><\/p>\n

In recent months, Anthropic has limited the release of its agentic AI system<\/a>, Claude Mythos, to a few dozen organizations, claiming it is\u00a0too powerful for general public use and could pinpoint defects in long-running computer systems. Shortly after the Mythos news, chief Anthropic competitor OpenAI followed with the planned release of an agentic system with similar strengths to Mythos (though OpenAI planned a larger release).<\/p>\n

In an earlier session at the conference, Jeffrey Tricoli, Charles Schwab\u2019s chief information security officer and managing director, said the \u201ccore mission\u201d of these frontier models was to \u201cfind an exploit\u201d in existing systems and \u201cput that exploit to use.\u201d\u00a0<\/p>\n

Tricoli stressed that \u201cproper guardrails\u201d were essential for the industry, as new agents inevitably end up in the hands of firms (and cybercriminals looking to target those firms).<\/p>\n

\u201cWhat you don\u2019t want to happen is you put something in place, it gives you an outcome you\u2019re looking for, but then it goes beyond, and then potentially, it starts with time to degrade or give you results that aren\u2019t favorable,\u201d he said.<\/p>\n

Data \u201ctriage\u201d is at the heart of the AI-related fixes firms should commit to, according to Tricoli, because if firms don\u2019t know and understand what kind of data is exposed, it can\u2019t be protected. Firms will be at a disadvantage if they can\u2019t understand, \u201cat a moment\u2019s notice,\u201d where specific data is located throughout their tech environment, he warned.\u00a0<\/p>\n

\u201cThose are all going to be challenges that we\u2019re going to have to start thinking through a lot more quickly,\u201d he said. \u201cBecause it\u2019s going to happen very fast.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Advancements and interest in artificial intelligence are moving so quickly that compliance officers worry the demand \u201cis going…\n","protected":false},"author":3,"featured_media":798959,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[64,255,67,132,68],"class_list":{"0":"post-798958","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-personal-finance","10":"tag-united-states","11":"tag-unitedstates","12":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116580464972719213","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/798958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=798958"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/798958\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/798959"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=798958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=798958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=798958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}