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FINRA Set to End Temporary Remote Inspection Relief with New Rules

Posted on March 15th, 2024 at 11:52 AM
FINRA Set to End Temporary Remote Inspection Relief with New Rules

From the desk of Jim Eccleston at ÍøÆØ³Ô¹Ï

The Financial Industry Regulatory Authority (FINRA) announced that it will conclude its temporary relief from in-person inspection requirements, implemented due to the COVID-19 pandemic, on May 31.

According to AdvisorHub, two new rules approved by the Securities and Exchange Commission (SEC) in November will replace this temporary relief. Effective June 1, the first rule alters the definition of a residential supervisory location, extending the inspection cycle for home offices from annually to once every three years.

The second rule establishes a remote inspection pilot program starting July 1, allowing certain firms to conduct virtual exams of broker offices. Firms can enroll in the pilot from June 1 to June 26. Beginning June 1, firms can treat brokers' offices as residential supervisory locations and must submit a list of these locations by October 15.

AdvisorHub reports that some firms, like Morgan Stanley, have allowed brokers to work from home for up to 90 days annually. FINRA advises those firms to assess whether an increase in remote locations necessitates approval as a material change. FINRA’s notice did not specify the threshold for a material change, but FINRA has promised additional guidance.

The development of these rules began in the summer of 2022. Despite objections from investor advocates and state securities regulators, the SEC approved them, citing consistency with broader obligations to supervise for fraud and investor harm. The North American Securities Administrators Association (NASAA), representing state regulators, later supported the rules.

 

ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra, sec

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