Regulators Address Innovation and Technology at SIFMA Conference

JD Supra Finance & Banking

Published March 31st, 2026

Detected April 1st, 2026

Summary

SEC, CFTC, and FINRA representatives at the SIFMA 2026 Compliance & Legal Annual Seminar discussed regulatory priorities including support for capital markets innovation, improved cross-agency coordination on crypto assets, and a shift away from regulation by enforcement. SEC Chairman Atkins outlined an 'Advance-Clarify-Transform' framework and proposed an innovation exemption for tokenized securities experimentation.

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What changed

SEC Chairman Atkins, Commissioner Peirce, FINRA President Cook, and CFTC Chief of Staff Zaidi signaled a renewed focus on fostering innovation while reducing regulatory burdens. Key initiatives discussed include the SEC-CFTC Joint Harmonization Initiative, a new crypto taxonomy to clarify treatment of digital assets under federal securities laws, and a contemplated innovation exemption allowing issuers a time-limited window to experiment with tokenized securities. The agencies emphasized 'right-sizing' compliance obligations and moving away from enforcement-first approaches.

Financial services firms should monitor these regulatory priorities as they signal potential future rulemaking. While no immediate compliance actions are required, firms dealing with digital assets may benefit from reviewing the new crypto taxonomy and preparing for anticipated regulatory clarity. The shift in regulatory tone regarding off-channel communication cases suggests potential recalibration of enforcement priorities, though firms should continue maintaining robust compliance programs.

Source document (simplified)

March 31, 2026

Regulators Address Innovation and Technology at SIFMA Conference

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At the 2026 Securities Industry and Financial Markets Association (SIFMA) Compliance & Legal Annual Seminar, held March 22–25 in Orlando, compliance experts, in-house and outside counsel and industry leaders joined representatives from multiple regulators, including SEC, CFTC and FINRA, to discuss key legal and compliance issues impacting the financial services industry today.

Across the main-stage sessions and panels, two themes surfaced: (1) a renewed emphasis on a desire for rulemaking designed to foster innovation while minimizing unnecessary regulatory burdens and (2) the growing practical impact of artificial intelligence across the industry.

Right-Sizing Regulation: A Focus on Rulemaking

Federal regulators signaled — more strongly than in prior years — an intent to prioritize rulemaking initiatives aimed at supporting capital markets innovation, improving cross-agency coordination (particularly for crypto and digital assets) and “right-sizing” compliance obligations. Notable speakers included SEC Chairman Paul Atkins, SEC Commissioner Hester M. Peirce, FINRA President and CEO Robert Cook and CFTC Chief of Staff Amir Zaidi.

Chairman Atkins’ remarks expanded on the “Advance–Clarify–Transform” framework he outlined just days earlier at SEC Speaks. 1 He emphasized advancing new regulations to remove impediments to innovation — an approach echoed by Chief of Staff Amir Zaidi. Both focused on digital assets as a key area where clearer regulatory pathways could encourage market activity that moved offshore following years of perceived (or actual) disfavor by enforcement staff and lack of clear regulation. Commissioner Peirce candidly remarked that “on crypto, we are not where we should be,” referencing the gap left by prior reliance on enforcement rather than clear, pragmatic regulation.

To further foster innovation, Chairman Atkins also highlighted a new innovation exemption that is being contemplated at the SEC. The exemption would provide a time-limited window to allow issuers to experiment with novel digital assets such as tokenized securities.

A second throughline was regulatory clarity — both in terms of setting expectations for registrants and aligning rulemaking frameworks across agencies. Chairman Atkins and Chief of Staff Zaidi expressed enthusiasm for the SEC-CFTC Memorandum of Understanding signed earlier this month and the creation of a Joint Harmonization Initiative. 2 The stated goals include joint rulemaking, a pragmatic framework for crypto assets and streamlined regulatory reporting. Earlier this month, the SEC, joined by the CFTC, issued a crypto taxonomy to clarify treatment of crypto assets under the federal securities laws, 3 a positively received first step in reducing jurisdictional uncertainty after years of divergent views by the SEC and the CFTC regarding the nature of such assets.

Chairman Atkins and Commissioner Peirce also emphasized materiality as a guiding principle for removing excessive regulatory obligations and disclosure requirements, and support for moving away from regulation by enforcement. In particular, Chairman Atkins pointed to the SEC’s off-channel communication cases as an example of how regulators should not act and received rousing applause when he said it had not been the SEC’s finest hour. 4 Both the SEC and FINRA agree that the “business as such” standard of Rule 17a-4 needs to be reviewed to better align with how business is conducted today and the types of communications the rule was initially intended to capture.

Other key leaders echoed this broader message, with FINRA President Robert Cook noting FINRA’s interest in reducing unnecessary compliance burdens. And Chief of Staff Zaidi reiterated CFTC Chairman Michael Selig’s “minimum effective dose of regulation” framing and indicated that the agency would examine perceived overregulation and seek to end regulation by enforcement.

While the practical impact of this tonal shift will depend on what these agencies actually implement through new rules or written guidance, a consistent message emerged: current regulators want to reduce burdens and design rules that work for markets while enabling innovation.

AI Is Here Now

Not surprisingly, AI also was a dominant theme throughout the conference, with discussion shifting from future possibilities to present-day deployments, risks and supervisory expectations. Financial institutions, public companies and regulators are approaching AI through the combined lenses of productivity and innovation, as well as governance and regulatory compliance.

AI is being used across the industry for increased productivity, business analysis and compliance support. FINRA’s 2026 Annual Regulatory Oversight Report includes a dedicated discussion of generative AI use cases and related issue-spotting. Examples highlighted include summarization and information extraction, chatbots that respond to queries, translation and workflow automation. And currently within the industry, financial services firms are using AI to assist with compliance functions such as communication reviews, AML and sanctions investigations support and trade surveillance. 5

As use cases expand, so do concerns about risk management — particularly supervision of AI and multiple agents, governance structures, third-party risk, recordkeeping, auditability and unintended outcomes, including hallucinations and bias in generative AI. Participants also raised important questions about whether AI prompts need to be treated as business communications and the resulting retention implications, whether AI discussions are or can be privileged and whether, and if so, how, firms should limit the authority of agentic AI tools. 6

AI washing, a topic of discussion at prior SIFMA conferences, was again flagged as a risk area. Panelists emphasized the importance of understanding the AI technologies in use, where they are deployed and what limitations apply. They cautioned against overstating AI capabilities, particularly as pressure increases for firms to use agentic AI.

Regulators acknowledged AI’s potential efficiency gains but stressed that adoption must be matched by proactive compliance measures. Both the SEC’s 2026 Examination Priorities and FINRA’s 2026 Annual Regulatory Oversight Report emphasize implementing policies and procedures to supervise AI use as part of governance and third-party risk management. 7 Regulators have also highlighted practices such as keeping a “human in the loop,” understanding the underlying technology, documenting an AI governance framework and conducting rigorous testing prior to deployment. 8

As the adoption of AI accelerates, the technology advances and the use cases become more widespread, both regulators and firms alike will continue to navigate and grapple with the practical and regulatory challenges of this transformative shift.

[1] Paul S. Atkins, Chairman, SEC, Prepared Remarks Before SEC Speaks (Mar. 19, 2026). See also C. Dabney O’Riordan, Nicole Love, Noah Curtiss, Manola Danese, Peter Rosenberg, Christopher Staley, Dilvin Tayip, Key Takeaways From SEC Speaks 2026, Fried Frank Client Memorandum (Mar. 27, 2026).

[2] Press Release, SEC, SEC and CFTC Announce Historic Memorandum of Understanding Between Agencies (Mar. 11, 2026).

[3] Press Release, SEC, SEC Clarifies the Application of Federal Securities Laws to Crypto Assets (Mar. 17, 2026).

[4] SEC Rule 17a-4 requires broker-dealers to retain all original communications relating to their “business as such” for no less than three years, including electronic business communications that are on personal devices. 17 C.F.R. § 240.17a-4(b)(4). Starting in 2021, the SEC brought numerous enforcement actions against dozens of financial firms for failure to retain text messages and/or messages on other unapproved written communication platforms in violation of this and other record retention provisions of the federal securities laws, resulting in over $1 billion in penalties. See, e.g., ** Press Release, SEC, Twelve Firms to Pay More Than $63 Million Combined to Settle SEC’s Charges for Recordkeeping Failures (Jan. 13, 2025).

[5] FINRA, 2026 FINRA Annual Regulatory Oversight Report (Dec. 9, 2025).

[6] SIFMA submitted a letter to the SEC requesting that the communications and record retention rules under Rules 17a-4 and 18a-6 of the Securities Exchange Act of 1934 and Rule 204-2(a)(7) under the Investment Advisers Act of 1940 reflect modern technological and compliance needs. See SIFMA, Modernizing Communications and Record Retention Rules for Broker-Dealers, Investment Advisers, and Security-Based Swap Dealers (SIFMA and SIFMA AMG) (Oct. 15, 2025).

[7] Division of Examinations, SEC, Fiscal Year 2026 Examination Priorities (2026); FINRA, 2026 FINRA Annual Regulatory Oversight Report (Dec. 9, 2025).

[8] FINRA, Regulatory Notice 24-09 (June 27, 2024).

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