Financial Advisor IQ (April 14, 2023) - The industry watchdog says it took into account public comments, including criticism from state securities regulators and Piaba.
The Financial Industry Regulatory Authority has resubmitted its proposal for a three-year pilot program allowing remote inspections of branch offices.
The industry’s self-regulator sent a proposal to the Securities and Exchange Commission this week seeking to allow but not require Finra member firms to conduct branch inspections without on-site visits.
The watchdog has temporarily allowed firms to conduct inspections of offices and non-branch locations remotely since November 2020, in light of Covid-19 pandemic measures to prevent the spread of the virus.
The latest proposal is “largely similar” to what Finra submitted in July and amended in December, according to the industry’s self-regulator. Public comments to the original proposals were largely supportive of the plan, Finra says, though the North American Securities Administrators Association and the Public Investors Advocate Bar Association raised concerns about implications for investor protection.
According to Finra, the current proposal reflects further Nasaa’s comments that suggest requiring firms to explain why they opt for remote inspections, particularly for high-risk branches or those raising red flags.
The industry’s self-regulator added that the current proposal “on balance, preserves investor protection objectives through the proposed safeguards while also providing Finra the opportunity to gauge the effectiveness of remote inspections as part of a modernized, reasonably designed supervisory system that reflects the current work environment and availability of technologies that did not exist when the on-site inspection originally was conceived.”
In October, Finra sought to extend allowing remote inspections through 2023 in case the thee-year pilot program proposed in July didn’t become effective in time.