If you run a financial firm in New York, you’re caught between two pressures. Your regulators — NYDFS, the SEC, FINRA — increasingly expect you to prove how you govern AI and where your data goes. And client data is exactly the kind you can’t paste into a public tool like ChatGPT. The good news: you don’t have to choose between using AI and staying in bounds. Here’s how financial firms actually do both.
The rules you can’t ignore
Three frameworks shape how a New York financial firm can use AI. None of what follows is legal advice — your compliance counsel has the final word — but this is the plain-English shape of it.
NYDFS Part 500 — the New York one
Every firm licensed by New York’s Department of Financial Services — RIAs, insurers, brokers, lenders, money transmitters — falls under it. Its 2024 AI guidance tells firms to manage third-party AI vendors, control where data is stored, and limit what data is fed to AI models. In plain terms: regulators expect you to keep nonpublic client data out of tools you don’t control.
The SEC
Examiners are now asking advisers how they govern AI. Using it without a documented, tested process is exactly the gap they’re probing — and firms that can show a coherent program are winning the due-diligence questions sophisticated clients now ask.
FINRA
Its existing rules on communications (Rule 2210) and supervision (Rule 3110) already cover AI chatbots and tools — firm-built or third-party. You’re expected to supervise outputs, keep records, and stay in control of your data.
The answer: private AI
One thread runs through all three frameworks — keep control of your data — and that’s the entire case for private AI. Instead of sending client information to a cloud model, the AI runs on infrastructure you control, so nonpublic data never leaves your environment. Cloud tools still earn their place for non-sensitive work; that split is called hybrid, and it’s where most firms land. The full trade-off — and a two-minute quiz — is in our local vs. cloud guide.
What AI does for a financial firm — compliantly
The capabilities are the same ones every firm wants. The difference is how each one is built to respect the rules above.
Document analysis
Reads statements, filings, and contracts to summarize them or pull the fields you need.Compliant by design: runs on your own servers — nonpublic client data never leaves the building.
Client communications
A chatbot or drafting assistant for client-facing messages.Compliant by design: built with FINRA 2210/3110-aware guardrails — every interaction logged, supervised, and reviewable.
Research & summarization
Digests market research, prospectuses, and long reports so your team reads conclusions, not 200 pages.Compliant by design: sensitive inputs stay inside your environment.
Compliance & change monitoring
Scans regulatory updates and flags what affects your obligations; supports KYC and AML review.Compliant by design: a human makes the call — AI assists the analyst, it doesn’t replace the sign-off.
Internal knowledge assistant
Lets staff query your own policies and procedures and get answers drawn from firm documents.Compliant by design: answers come from your documents, on private infrastructure.
What we’d build for your firm
We’re a New York–based AI shop that builds private and hybrid AI for firms that can’t afford a data-handling mistake. That means the AI itself plus the governance documentation regulators now ask to see — how it’s deployed, what data it touches, how it’s supervised. We start with the one workflow where AI saves the most time at the least risk, prove it, and expand from there.
This page explains how we build AI to respect your obligations — it isn’t legal advice. Your compliance counsel has the final word on what your firm must do.
Frequently asked questions
Can my RIA or financial firm use ChatGPT?
Consumer ChatGPT is risky for client data — it may train on what you type. Business and Enterprise tiers with the right settings and an internal policy are safer for general work, but for nonpublic client information most firms use private AI instead, so the data never leaves their control.
Does NYDFS Part 500 apply to AI?
Yes. New York’s Department of Financial Services confirmed in 2024 that Part 500’s existing requirements — third-party vendor management, access controls, and data governance — apply to AI. You remain accountable for where your data goes, even when an AI tool or vendor handles it.
Is private AI compliant with SEC and FINRA rules?
Private, on-premise AI directly supports the data-control and supervision expectations those regulators have, because client data stays in your environment and every interaction can be logged. Compliance is about your whole program, not a single tool — but keeping data in-house removes the biggest risk.
What’s the safest way for a financial firm to start with AI?
Begin with an internal, lower-risk use case — document analysis or a knowledge assistant — on a private setup, with the governance documented from day one. You get a real win and a proof point for examiners before anything client-facing goes live.