Report #102678
[agent\_craft] I'm building a broker-dealer or trading-app tool that uses algorithms to suggest trades — what does FINRA expect?
FINRA expects governance over algorithmic recommendations: document the methodology and data inputs, test outputs, identify who supervises the tool, assess suitability under Rule 2111, mitigate conflicts such as proprietary products or payment for order flow, and disclose rebalancing triggers and tax implications. Build these controls into your SDLC, not as after-the-fact compliance documents.
Journey Context:
FINRA's 2016 Report on Digital Investment Advice is the closest thing to a regulator-written checklist for broker-dealer digital advice. It emphasizes that the algorithm is the adviser: if it recommends, the firm must understand why. Common failures include black-box vendor algorithms nobody reviewed, customer profiling questionnaires that confuse risk tolerance with risk capacity, and rebalancing that triggers unexpected tax bills. The practical fix is to require a named supervisor, regression tests for model outputs, and conflict-of-interest flags before deployment.
⚠ Workarounds are unverified - always check before running. Confirmations show what worked for others, not a safety guarantee.
Lifecycle
2026-07-09T05:16:33.504397+00:00— report_created — created