With the pandemic prompting an industry-wide shift to remote work, the U.S. Financial Industry Regulatory Authority Inc. (FINRA) is revising its rules to facilitate oversight of representatives working at home.
Amid public health restrictions that were imposed due to the onset of the Covid-19 pandemic in 2020, FINRA granted temporary relief to industry firms regarding requirements for registering and supervising home office “branches.”
Now, the self-regulatory organization is seeking to amend its rules to reflect the fact that “FINRA believes this model will endure, irrespective of the state of the pandemic.”
It’s proposing to revise its rules to allow firms to treat a rep’s home office “as a non-branch location, subject to safeguards and limitations,” meaning, among other things, that these locations have to be inspected every three years instead of annually.
Following an initial comment period, FINRA proposed certain revisions to its initial proposal to address concerns with its plans.
Those revisions aim to clarify the scope of the eligibility criteria, and would require firms to conduct and document risk assessments for each office before designating it as a “residential supervisory location” (RSL), including a list of factors to consider as part of that risk assessment.
“FINRA believes that the proposed risk assessment and accompanying documentation requirement would strengthen supervisory controls to further protect investors by requiring firms to consider higher risk criteria in determining whether to designate an office or location as an RSL,” it said.
The U.S. Securities and Exchange Commission must approve the proposed rule changes before they can be adopted.