FINRA’s Remote Inspections Pilot Program Begins; 741 Member Firms Opt-In to Participate
July 24 2024 - 11:04AM
Business Wire
A total of 741 member firms volunteered to participate in
FINRA’s Remote Inspections Pilot Program, FINRA announced today in
a blog post.
The pilot program provides eligible member firms with the
flexibility to satisfy their inspection obligation without an
on-site visit to the office or location, subject to terms that
include conducting and documenting a risk assessment, and producing
written supervisory procedures for conducting remote inspections
and reporting inspection data to FINRA. The opt-in period for firms
to participate in the initial phase of the pilot program ended on
June 26, 2024. The initial phase of the pilot program started on
July 1, 2024, and ends on Dec. 31, 2024.
“FINRA proposed in 2023 to create a voluntary, three-year Remote
Inspections Pilot Program to evaluate the impact and efficacy of
remote inspection of branches and offices by member firms. The idea
for the pilot arose from trends FINRA saw in the use of technology
and evolving business practices in compliance,” Greg Ruppert,
Executive Vice President and Head of Member Supervision at FINRA
and Jonathan Sokobin, Executive Vice President, Chief Economist and
Head of the Office of Regulatory Economics and Market Analysis at
FINRA, wrote in the blog post.
“The pilot will allow FINRA to collect evidence of the
effectiveness of remote inspections. As discussed in the rule
proposal, FINRA will use the pilot data to assess whether remote
inspections may be part of a modernized supervisory system that
reflects the hybrid work environment and the availability of
technologies that did not exist when the on-site inspection was
conceived. The first submission of data from the participants is
due in mid-October,” Ruppert and Sokobin added.
The 741 participant firms represent 22% of FINRA member firms.
Opt-ins are highest among large firms (500 registered
representatives or more), with a participation rate of 60% in this
category. Mid-size and small firm participation rates are 47% and
18% respectively.
Participant firms collectively cover 67% of all registered
representatives and 53% of registered branches.
The deadline to opt-in to participate for Year 2 of the pilot
program is Dec. 27, 2024. Year 2 of the pilot program will start on
Jan. 1, 2025, and end on Dec. 31, 2025.
About FINRA
FINRA is a not-for-profit organization dedicated to investor
protection and market integrity. FINRA regulates one critical part
of the securities industry—member brokerage firms doing business in
the U.S. FINRA, overseen by the SEC, writes rules, examines for and
enforces compliance with FINRA rules and federal securities laws,
registers broker-dealer personnel and offers them education and
training, and informs the investing public. In addition, FINRA
provides surveillance and other regulatory services for equities
and options markets, as well as trade reporting and other industry
utilities. FINRA also administers a dispute resolution forum for
investors and brokerage firms and their registered employees. For
more information, visit www.finra.org.
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