August 15, 2022

FINRA Proposes Remote Office Inspection Pilot Program

FINRA proposed a voluntary three-year pilot program to allow broker-dealers to conduct annual office inspections remotely. The proposed amendments to Rule 3110(c) ("Supervision") would facilitate permanent work-from-home arrangements for broker-dealers through the pilot program. The proposal was published in the Federal Register.

In the proposal, FINRA summarized its history with temporary rules on remote inspections and developments in "compliance technology." Throughout the pandemic, FINRA provided and regularly extended relief from on-site inspections; relief is currently set to expire on December 31, 2022. FINRA stated that the pilot program would build on the temporary rules, but would (i) include "targeted exclusions from participation in the program for higher risk member firms, and offices or locations," (ii) "require a firm [to] conduct a risk assessment for each office or location that is selected to be inspected remotely"; and (iii) "require a firm to establish and maintain written supervisory procedures to account for the risk assessment."

FINRA stated that "the optimal use of on-site inspections deserves further consideration." The proposed pilot program would allow FINRA to gather information from market participants on the sustainability of a permanent remote option for inspections.

Comments on the proposal are due by September 6, 2022.

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