With the sudden arrival and widespread availability of artificial intelligence (AI) tools, it can be difficult to remember a time when such technology was still mostly theoretical. When OpenAI released ChatGPT in the fall of 2022, every industry scrambled to project how this revolutionary technology could affect their sector. The Financial Industry Regulatory Authority (FINRA) is no exception, as it recently addressed the use of generative AI tools like ChatGPT in the context of its arbitration proceedings. In Volume 2 of The Neutral Corner, FINRA informed its arbitrators that the use of generative AI tools like ChatGPT was prohibited. An article titled “Prohibited Independent Research in the Age of Artificial Intelligence: Don’t Do It” clearly warned arbitrators that using these tools could trigger potential consequences that may jeopardize the integrity of the arbitration process or result in an arbitrator’s removal from the official FINRA roster. As an individual financial advisor or a member firm, it’s important to understand how FINRA is addressing the use of AI so you can identify any potential violations and call attention to them as they pertain to your expungement request matter or other arbitration proceedings. With a dedicated securities law attorney by your side who keeps up-to-date on the latest FINRA rules, regulations, and recommendations, you can trust that your best interests will remain as secure as possible. Let’s take a look at how FINRA is handling the widespread availability of generative AI tools and how this technology can affect arbitration proceedings.
Understanding the Role of a FINRA Arbitrator
First, it’s helpful to understand the role of a FINRA arbitrator and identify their various roles and responsibilities. According to FINRA, the arbitrators they look for are “neutral, well-qualified and essential to maintaining a fair, imperial and efficient system of dispute resolution.” Essentially, FINRA arbitrators serve as the decision makers for the disputes they oversee. In order to become an arbitrator, an applicant must have at least five years of paid professional or business experience (either outside or inside of the securities industry). They also must have at least 60 college level credits in order to qualify. Once an applicant has been accepted, they must participate in FINRA’s Basic Arbitrator Training Program and fulfill any other requirements as needed. It’s important to understand that the arbitrators are not employed by FINRA; rather, they are independent contractors who do not receive FINRA employee benefits.
Enhanced Expungement Training for Arbitrators
If an arbitrator is interested in handling cases involving the expungement of customer dispute information from the Central Registration Depository and a financial advisor or securities professional’s BrokerCheck profile, the applicant must participate in what’s known as Enhanced Expungement Training. The Securities and Exchange Commission (SEC) approved FINRA’s amended rules pertaining to the expungement request process, and these revised rules took effect on October 6, 2023. Under these revised rules, a three-person panel of randomly selected arbitrators will oversee an expungement request. The panel will be randomly selected from a Special Arbitrator Roster, which is a list of all qualified and specially trained arbitrators approved by FINRA to oversee these cases. Like any prominent legal or administrative role, arbitrators overseeing an expungement request must observe all procedural rules and requirements as they serve in this capacity.
Can FINRA Arbitrators Use AI Tools Like ChatGPT?
In its recent article addressing the use of AI tools during the arbitration process, FINRA reminded arbitrators of their professional obligations. For instance, arbitrators “should only seek clarity on legal issues by requesting additional information from the parties on their cases.” In other words, arbitrators must request information from the parties directly instead of relying on generative AI tools like ChatGPT to provide quick summaries or overviews of a particular case or issue. With the increasing availability of these generative AI tools, the temptation to rely on these tools for trustworthy or accurate information becomes hazardous. FINRA warned arbitrators that “AI tools rely on the data in their datasets, the information they are trained on information they can access—such as through internet searches—to provide answers to queries. AI tools may ‘hallucinate’ (i.e., make up an answer) to produce an answer that skews only toward the information available in their datasets, resulting in a biased answer.” Put simply, the convenience of generative AI technology does not justify the potential risks and limitations of using these tools to provide credible information within the official context of an arbitration procedure.
AI Technology and FINRA Data Privacy Concerns
Another issue with arbitrators relying on generative AI tools is potentially compromising confidentiality and data integrity. For instance, any information that you enter into a publicly available AI tool like ChatGPT could be stored and then used to train later models or for other purposes. This means that confidential or sensitive information could become compromised or publicly available, which threatens the overall safety and integrity of sensitive data. Moreover, it’s unclear where such data is stored, as these companies tend to provide vague responses as to whether the data is stored on external servers (and therefore subject to various terms and conditions that may not guarantee confidentiality or privacy). Since arbitrators are bound by a duty of confidentiality and an ongoing obligation to maintain the ethical standards of the arbitration forum, they must avoid using generative AI tools to minimize potential violations of this code of conduct. For now, it’s best to rely on the information provided by the parties involved in the arbitration and their legal teams instead of entrusting this sensitive information to AI technology.
Get Started With a Skilled FINRA Expungement Lawyer Today
As a professional in the securities industry, you have likely heard about the recently enacted restrictions that FINRA made to its expungement request process. It may seem as if it will be harder than ever to succeed in your expungement request, it’s not impossible. When you enlist the guidance of a highly experienced and knowledgeable FINRA expungement attorney, you can trust that your best interests will remain protected at every opportunity. Attorney Tosh Grebenik has a successful track record of defending professionals in the financial and securities industries and obtaining expungements of wrongful complaints. Contact Judex Law, LLC, today to learn more about how you can achieve your desired outcome.
If you have questions about FINRA’s arbitration process or you are interested in pursuing an expungement request to have unfair customer dispute information removed from the CRD and BrokerCheck, Judex Law, LLC, is ready to assist you. Call our Colorado office today at (303) 523-4022 to get started with a highly qualified and dedicated securities law attorney.
