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FINRA files for extension of remote inspections of branch offices into 2024

On Behalf of | Oct 4, 2023 | FINRA Compliance

The Financial Industry Regulatory Authority has filed a request to extend its temporary program for remote inspections into next year, reports ThinkAdvisor.

The request, filed with the Securities and Exchange Commission last month, asks that the expiration of the program be delayed until June 30, 2024.  It had been scheduled to expire at the end of 2023.

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 during the COVID-19 pandemic, the temporary rule was implemented to relieve firms of the obligation to perform on-site, in-person inspections amid the challenges of the health crisis.  Firms were thus permitted to remotely inspect their brokers’ offices.

FINRA has also filed a proposal with the SEC for a three-year pilot program that would move toward a more permanent system for remote inspections.

FINRA’s Residential Supervisory Locations (RSL) proposal would allow a broker working remotely to supervise other brokers without the broker’s home being designated as a branch office. The RSL would be subject to examination by the parent brokerage once every three years instead of the annual inspection that must be performed at an office of supervisory jurisdiction.

The plan was amended in April to set forth certain conditions for a home office to be considered a non-branch residential supervisory location.

The authority said the extension of the temporary rule would not be necessary if the SEC approves the pilot program prior to June.  “Given the uncertainty as to whether the Commission will approve or disapprove the Remote Inspections Pilot Program Proposal by the end of calendar year 2023, FINRA believes that the proposed extension is necessary to provide firms the time to prepare for either the resumption of on-site inspections,” FINRA said in its filing.

The SEC has until the end of December 2023 to decide on FINRA’s Remote Inspections Pilot Program Proposal.  In August, the commission asked for additional public comments on the pilot program.

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