More than 700 brokerage firms have volunteered to take part in the U.S. Financial Industry Regulatory Authority Inc. (FINRA)’s new pilot program that enables them to carry out their branch compliance exams remotely.
To examine the efficacy of remote oversight, the self-regulatory organization offered certain firms the option to meet their branch inspection requirements without making on-site visits.
Participating firms instead agreed to conduct and document a risk assessment, adopt supervisory procedures for remote inspections and to report certain data to FINRA.
The pilot will allow FINRA to collect evidence of the effectiveness of remote inspections, said Greg Ruppert, executive vice-president and head of member supervision at FINRA, and Jonathan Sokobin, executive vice-president and head of the Office of Regulatory Economics and Market Analysis at FINRA.
“FINRA will use the pilot data to assess whether remote inspections may be part of a modernized supervisory system that reflects the hybrid work environment and the availability of technologies that did not exist when the on-site inspection was conceived,” they added in a joint statement.
The first phase of the pilot will run from July 1 to Dec. 31, with firms required to submit data to the organization in October.
While the participating firms represent 22% of FINRA’s membership, they include 67% of all registered reps and more than half (53%) of branches, reflecting the pilot program’s popularity with larger dealers.
The organization noted that 60% of its large firms (firms with more than 500 reps) volunteered for the program, compared with 47% of mid-sized firms and 18% of small dealers.
The deadline to opt in to the next phase of the program, which will run in 2025, is Dec. 27.