John O’Connell Published in Advisorpedia: FINRA Doesn’t Need the SEC’s Permission. Neither Does Your Next Examination.

John O’Connell authored this article for Advisorpedia, where he discusses the AI governance gap in the wealth management industry and how broker-dealers should govern their AI use given the lack of AI-specific rules from the SEC. The question is not when the SEC will act. The question is whether your WSPs will be ready when FINRA does.

John recommends establishing a clear, documented definition of what constitutes an AI tool under the firm’s supervision framework. Identifying what is subject to the AI governance program and what is not. Establishing a pre-approval process for registered representative AI tool use. Building AI into the supervisory review procedure for recommendations. Then finally, addressing AI-generated and AI-assisted client communications in your retention infrastructure.

The SEC being slow on AI rules is not good news for broker-dealers. It means the clock you are actually on is FINRA’s, and FINRA’s clock runs faster. Every day without updated WSPs is a day the next examination cycle is writing your finding for you.