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FINRA Plans BrokerCheck Changes, Remote Exams

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The Financial Industry Regulatory Authority is planning several major enhancements to BrokerCheck as well as allowing low-risk firms to use technology to conduct remote inspections, and announced Thursday an Oct. 1, 2018, effective date for its streamlined competency exams.

At its September board meeting, FINRA’s board authorized the self-regulator to publish a Regulatory Notice seeking comment on proposed amendments to Rule 8312 (FINRA BrokerCheck Disclosure).

The amendments would:

  • provide additional investment advisor information through BrokerCheck about individuals and firms with broker-dealer and investment advisor registrations;
  • make publicly available limited data sets of BrokerCheck information on individuals, similar to what is currently provided by the Securities and Exchange Commission through the Investment Adviser Public Disclosure site;
  • exclude from BrokerCheck information about deceased individuals and certain information pertaining to individuals unregistered since 1999; and
  • allow firms to include in BrokerCheck a comment about arbitration awards pertaining to the firm.

Former Securities and Exchange Commission Chairwoman Elisse Walter, who’s now a FINRA Board member, said at the board meeting that the proposed changes are “related to BrokerCheck public disclosure aspect of the CRD system and how a firm goes about inspecting its branch offices.”

FINRA will also publish a Regulatory Notice seeking comment on proposed amendments to FINRA Rule 3110 (Supervision) to provide members the flexibility to remotely conduct inspections of “qualifying offices” where only low-risk activity takes place.

Under the proposal, a “qualifying office” would be limited to no more than three associated persons — none of whom has a “disciplinary history” or is subject to statutory disqualification — and no customer funds or securities could be handled at the location.

A broker-dealer that wants to conduct remote inspections would be required to have policies and procedures reasonably designed to determine whether a location is eligible for remote inspection as a “qualifying office” and to assess whether a remote inspection of any such office is reasonable, the FINRA plan states.

FINRA’s proposals must be filed with the SEC for additional notice and comment, and then be approved by the agency.

The self-regulator released Thursday Regulatory Notice 17-30 announcing an Oct. 1, 2018, effective date for the rule change related to streamlined competency exams.

The rule change, approved by the SEC on July 7, restructures FINRA’s representative-level qualification exams, creates general knowledge and specialized knowledge exams, allows “permissive registration,” establishes an exam waiver process for persons working for a financial services affiliate of a member, and amends certain Continuing Education requirements.

Under the streamlined exam structure, all new representative-level applicants will be required to pass a general knowledge exam, the Securities Industry Essentials, and a revised representative-level qualification exam, such as the revised General Securities Representative (Series 7) exam, appropriate to their job functions at the firm with which they are associating before their registration can become effective.

“This is an important change built upon the need to streamline the examination process and eliminate redundancies in qualification and registration requirements,” said FINRA CEO Robert Cook in a statement. “The new structure brings greater consistency and uniformity to the process for entering and returning to the brokerage industry.”

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