FINRA Proposes Rule Change to Facilitate Home Offices

FINRA proposed amendments to Rule 3110 ("Supervision") to adopt new supplementary Material .19 ("Residential Supervisory Location") "to treat a private residence at which an associated person engages in specified supervisory activities as a non-branch location, subject to safeguards and limitations."

After review of pandemic-related temporary relief and technological advances in surveillance and monitoring, FINRA concluded that the "blended work force model" will "endure, irrespective of the state of the pandemic." The proposed amendments would "align FINRA's definition of an office of supervisory jurisdiction ("OSJ") and the classification of a location that supervises activities at non-branch locations with the existing residential exclusions set forth in the branch office definition." Private residences would be subject to a number of conditions, including that only one associated person (or multiple persons if they are family members) can conduct business at the location, that the location is not held out to the public as an office, that books and records must be maintained by the associated person outside the location and that customers cannot visit the location, among others.

The proposed amendments would allow for periodic inspections on a Residential Supervisory Location (likely) every three years, rather than annually.

If approved by the SEC, the effective date would be no later than 90 days following the publication of the notice in the Federal Register.