Representing financial professionals, financial institutions and investors in investment loss, employment and disclosure matters, and in regulatory investigations nationwide.

FINRA proposes extending remote inspection of offices into 2023

On Behalf of | Nov 16, 2022 | FINRA Compliance

The Financial Industry Regulatory Authority has proposed extending remote inspections of branch offices through the end of 2023, reports InvestmentNews.

Under FINRA Rule 3110, member firms are required to maintain a system of supervising the activities of their personnel to ensure compliance with securities laws and regulations. But beginning in November 2020 during the COVID-19 pandemic, a temporary rule was implemented to relieve firms of the obligation to perform on-site, in-person inspections amid the challenges of the health crisis.

The temporary rule was due to expire at the end of 2022. But FINRA has now filed a proposal with the Securities and Exchange Commission for a one-year extension. A separate proposal has also been filed with the SEC establishing a three-year pilot program to move toward a more permanent system for remote inspections.

FINRA said the extension being proposed “would avoid a potential lapse in the temporary relief while challenges from COVID-19 persist, provide firms regulatory continuity in meeting their inspection obligations during the remaining Commission review period of the Pilot Proposal, and allow firms time to adapt to the pilot program, if approved, and prepare for conducting on-site inspections, if applicable.”

The temporary extension proposed by FINRA would take effect January 1st unless the SEC has an objection. It would automatically expire on the date the pilot program takes effect, or on December 31, 2023.

FINRA has noted that firms will need a significant number of months to prepare for the pilot program and may need guidance from the authority to implement the requirements and limitations involving specific firms and office locations.

The attorneys at Lewitas Hyman understand the complexities that come with being the subject of a regulatory inquiry by the SEC, FINRA, and other self-regulatory organizations, and we have the experience to guide and advise you through any type of regulatory investigation. If you are the subject of a regulatory proceeding, contact us at (888) 655-6002 or through our online contact form for a free consultation.