FINRA Rule 3110 requires a broker-dealer to establish and maintain a supervisory system reasonably designed to achieve compliance with securities laws and FINRA rules. It covers written supervisory procedures, designated supervisors with defined responsibilities, review of correspondence and internal communications, and internal inspections. It is the rule under which supervisory failures are most often charged, because it asks not whether misconduct occurred but whether the firm had a system that should have caught it.
AI reaches the rule through conduct rather than through technology. Where a model drafts client correspondence, summarises a research note, screens a communication or takes an action inside a workflow, that output is the firm's, and the question is whether the firm supervised it. "Reasonably designed" is assessed on what the firm could show, which means the supervisory record has to exist before anyone asks for it.
How it differs from model risk guidance. Model risk guidance asks whether the model is fit for purpose. Rule 3110 asks whether the firm supervised the conduct the model participated in. The second question survives the first: a validated model used without supervision is still a 3110 problem.
Why agents raise the stakes. A supervisory system built for people assumes a reviewable artefact — a message sent, a document produced. An agent may take twenty actions between two artefacts. If the intermediate steps are not recorded, the supervisory record has a hole in exactly the place an examiner will look.
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