SEC Sets Comment Deadline on Proposed Amendment to FINRA Pilot Program for Remote Office Inspections

The SEC set a comment deadline of of August 29, 2023 for a FINRA proposal to previously proposed amendments to implement a three-year pilot program allowing member firms to meet their internal inspections obligations without the need for on-site visits to an office or location. The SEC stated that commenters who wish to file a rebuttal to another comment submission must submit the rebuttal by September 12, 2023.

The SEC is providing a comment period in response to FINRA's filing to amend the proposed rule change ("Amendment No.1") and stated in the Federal Register that it "anticipates submitting a response to comments by separate letter."

As previously covered, the FINRA proposal would not alter the supervisory obligations under FINRA Rule 3110 ("Supervision"), but would provide members with the flexibility of satisfying their inspection obligations under Rule 3110(c) without the need for on-site visits, subject to certain conditions. Under the proposed rule, the conditions include (i) requiring firms to conduct risk assessments, (ii) barring certain firms from participating in the program, (iii) requirements for the firm's recordkeeping, surveillance and technological systems and (iv) quarterly data reporting obligations for participating firms. Further, the proposal would require member firms to undergo a remote inspection of their electronic communications, correspondence, books and records.