A group of state securities regulators is urging FINRA to set firmer expectations for how broker-dealers supervise social media posts and AI-generated content, even as the self-regulator considers giving firms more flexibility in reviewing communications with retail investors.
The North American Securities Administrators Association was among the commenters that filed letters last week before the deadline on FINRA’s proposed communications rule changes.
Under current rules, a firm principal generally must pre-approve retail communications. FINRA’s proposal would replace that blanket requirement with a risk-based approach: firms would adopt their own written procedures specifying which categories of communications require principal review.
NASAA said it recognized FINRA’s interest in cutting compliance costs but argued the proposal should include clearer baseline standards for social media and artificial intelligence. The association said firms that partner with financial influencers should always obtain principal pre-approval before those posts go live.
State regulators warned that social platforms can spread misleading claims and encourage high-risk investing. Broker-dealers that publish or amplify third-party “finfluencer” content, they said, should be accountable for its accuracy before it reaches investors.
NASAA also called for mandatory minimum standards on AI tools used to create or supervise investor communications, rather than leaving the issue to general best-practice language. A firm that cannot explain how its AI supervision system works, what data it relies on, how it reaches conclusions, and how the firm oversees both the tool and its output should not be treated as having fulfilled its supervisory obligations, the group wrote.
The American Securities Association, which represents smaller and regional firms, supported the proposed shift away from automatic pre-approval. It argued that requiring principals to sign off on posts from employees’ personal social media accounts is impractical. ASA said the mere use of AI should not automatically expand or shrink the scope of principal review beyond what a risk-based framework already requires, though it asked FINRA for more guidance on how firms should evaluate and supervise AI vendors and tools.
The Securities Industry and Financial Markets Association also backed efforts to update the communications rules but requested additional clarity on how firms should assess risk when contacting retail customers. SIFMA noted that FINRA’s suggestion that firms consider whether a communication is educational or promotional draws a “fine line.”