The Financial Industry Regulatory Authority wants to adopt more changes implemented during the Covid-19 pandemic, with a proposal to study the possibility of remote inspections of all branch offices.
The industry’s self-regulator sent a proposal to the Securities and Exchange Commission last month about implementing a three-year pilot program letting member firms conduct branch inspections without on-site visits.
Finra said that a variety of technological shifts — such as a switch to electronic preservation of records, communications and account opening, as well as remote supervision of staff — have already changed “the practices that formed the original bases for an on-site inspection requirement.”
The watchdog adds that member firms have been questioning on-site inspections in light of the changes as well.
Moreover, the Covid-19 pandemic only “accelerated the use of a wide variety of compliance and workplace technology” as various entities had to adapt to remote working, according to Finra.
In November 2020, Finra temporarily allowed firms to conduct inspections of offices and non-branch locations remotely and last year proposed extending the practice.
“With the confluence of advances in compliance technology and the permanent shift to a remote or hybrid work environment, made more pronounced by the pandemic, FINRA believes that the optimal use of on-site inspections deserves further consideration,” the industry’s self-regulator said in its proposal.
“This program would provide FINRA with specific, structured data from member firm pilot participants to evaluate their experiences — positive and negative — and inspection findings,” Finra added.
The proposal was first reported by WealthManagement.com.
Last week, Finra also proposed regulating the use of home offices as non-branch locations. The number of homes serving as non-branch locations jumped by 53% to 37,290 at the end of April from 24,369 on Dec. 31, 2019. During the same period, the number of registered branch locations dropped from 152,682 to 151,463.
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