SIFMA Urges SEC to Approve FINRA Proposal on Remote Inspections

SIFMA urged the SEC to approve FINRA's proposal to implement a voluntary three-year pilot program to allow broker-dealers to conduct annual office inspections remotely.

In comments on the proposed rule change, SIFMA said that the amendments would allow industry participants to fulfill regulatory obligations, offer flexible work arrangements and provide "regulators the opportunity to assess the success of remote inspections in a structured manner and hopefully update severely outdated guidance that does not reflect significant changes in technology and the workforce."

Additionally, SIFMA urged the SEC to consider the proposal simultaneously with FINRA's proposal on Residential Supervisory Location, describing the two proposals as interconnected. SIFMA recommended:

• requiring mandatory inspections only for locations where:
  • firm personnel meet with customers;
  • the firm holds customer securities or funds; or
  • any other locations that a firm determines after conducting a risk-based analysis;
• eliminating the periodic inspection requirement and requiring inspections based on risk; and
• requiring the documentation of risk factors relevant to inspections.

SIFMA encouraged the SEC to approve the proposals with an effective date by year-end, which is when the temporary relief is set to expire, saying that any lapse in relief would result in regulatory uncertainty.