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ARTICLE · 26 MARCH 2026

AI Model Validation In Regulated Financial Firms: Supervisory Expectations And Practical Considerations

Cahill Gordon & Reindel LLP
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In this client alert, Frank J. Weigand and Louis Capizzi examine considerations that are becoming more critical for broker-dealers and investment advisers as the use of AI continues to expand.

United StatesTechnology
Frank Weigand
Frank Weigand
Louis Capizzi
Louis Capizzi
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I. Introduction

Over the past several years, broker-dealers and investment advisers have begun incorporating artificial intelligence ("AI") tools into an expanding range of regulated and operational workflows, including customer communications, trading strategies, investment research, compliance monitoring, and internal administrative processes.1 While the adoption of these technologies continues to accelerate, U.S. securities regulators have consistently emphasized that existing legal and regulatory obligations remain fully applicable as they apply to this new technology.2

The SEC, FINRA, and other financial regulators have repeatedly underscored that their rules are technology neutral, meaning that the same supervisory, recordkeeping, disclosure, and investor-protection requirements apply whether a task is performed by a human employee, traditional software, or an AI system.3 This principle has important practical implications. For example, FINRA has reminded member firms that

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