On Apr. 11, FINRA proposed a voluntary, remote inspections pilot.
FINRA proposed a rule change to amend FINRA Rule 3110 to adopt voluntary, 3-year remote inspections pilot program to allow member firms to elect to fulfill obligation.
By conducting inspection of some/all branch offices, locations remotely without on-site.
Proposed rule change largely similar to FINRA-2022-021 filed in Jul. 2022, and withdrawn on Apr. 11, 2023 to consider more safeguards and clarifications, #144749.
Key Terms of Proposal
Requirement to conduct, document risk assessment for inspecting an office or location remotely and providing non-exhaustive list of factors to consider for assessment.
Criteria that would make a member firm ineligible to participate in the program.
Conditions a member firm must satisfy before becoming a pilot program participant relating to the firm’s recordkeeping system, and surveillance and technology tools.
Criteria that would make ineligible for remote inspection certain firm offices/locations.
Conditions firm’s office or location must satisfy to be able to undergo a remote inspection relating to electronic communications, correspondence, books and records.
Requirement that a firm provide FINRA specified data, information on quarterly basis.
Authorization for FINRA to determine in public interest that a firm is no longer eligible.
Consultation
Comments on proposed rule change due 21 days after publication in federal register.
Apr. 28, 2023, SEC Filing
On Apr. 28, 2023, SEC issued notice of FINRA proposal, for a 21-day comment period.
May 2023 SEC Fed Reg Proposal
On May 4, 2023, SEC published proposal in federal register, comments by May 25.
Aug. 2023 SEC Fed Reg Amendment, Proceedings
On Aug. 8, 2023, SEC published notice of amendment no. 1 and order instituting proceedings to approve or disapprove in federal register, comments by Aug. 29, 2023.
If comments are received, rebuttal comments should be submitted by Sep. 12, 2023.
On Aug. 2, 2023, SEC issued the notice of filing and order instituting proceedings.
FINRA filed amendment with the SEC on Aug. 1, 2023, in light of comments received.
Amendments re risk assessment and red flags, significant findings reporting, record maintenance timeframe, data and information requirements pertaining to pilot year 1.
In Sep. 2023, FINRA proposed to extend relief re remote inspections, see #185579.
Nov. 17, 2023 SEC Approval
On Nov. 17, 2023, SEC issued order approving proposal to adopt voluntary program.
Nov. 24, 2023 SEC Fed Reg Approval
On Nov. 24, 2023, SEC published order approving FINRA's proposal in federal register.
In Jan. 2024, FINRA reported on effective dates and end of regulatory relief, #198780.
Jul. 2024 FINRA Pilot Commencement
On Jul. 24, 2024, FINRA reported remote inspections pilot program began Jul. 1.
741 member firms volunteered to participate; provides eligible member firms with the flexibility to satisfy inspection obligation without on-site visit to the office or location.
Subject to terms l- conduct, document risk assessment, produce Written supervisory procedures (WSP) for conducting remote inspection, report inspection data to FINRA.
Opt-in period for firms to participate in the initial phase of the pilot program ended on Jun. 26, 2024; initial phase of pilot program started Jul. 1, 2024, ends Dec. 31, 2024.
Deadline to opt-in to for year 2 is Dec. 27, 2024; runs from Jan. 1 to Dec. 31, 2025.
Oct. 2024 FINRA Pilot Categories
On Oct. 3, 2024, FINRA issued findings reporting categories for pilot participants.
