FINRA Podcast: Inspection Requirements - Part 3

FINRA released the third in a five-part series of podcasts about FINRA's new Consolidated Supervision Rules. This podcast addresses inspection requirements under new FINRA Rule 3110.

In the podcast, FINRA explained that Rule 3110 requires firms to review their businesses at least once a year, including inspecting their supervisory jurisdiction and supervisory branch offices. Firms also must inspect nonsupervisory branch offices at least every three years, even if there is no indication of irregularities or misconduct, as well as non-branch locations on a regular periodic schedule.

Additionally, FINRA explained that firms must retain a written record of each inspection and its date, and reduce each inspection to a written report to be kept on file for at least three years. Regarding what must be included in the reports, FINRA stated, firms must test and verify each location's supervisory policies and procedures for things such as safeguarding customer funds and securities, maintaining books and records, and the supervision of supervisory personnel and customer account information changes, among other things.

Regarding the question of who can conduct inspections, FINRA stated, Rule 3110 prohibits an associated person from inspecting a location if he or she is either assigned there or supervised by someone there, but it does allow compliance personnel assigned to the firm's compliance department to review a location from which they work. In addition, the rule provides an exception for firms with limited size and resources.

See: FINRA Podcast; Transcription of Podcast. Related news: FINRA Podcast: Reviewing Correspondence, Communications and Complaints - Part 2 (September 24, 2014); FINRA Podcast: Primary Supervision Requirement – Part 1 (September 18, 2014).