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Robert Cook, FINRA CEO

Regulation and Compliance > Federal Regulation > FINRA

FINRA Plans New Branch Inspection, Home Office Rules

By Melanie Waddell

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“Don’t hold your breath” that two proposals by the Financial Industry Regulatory Authority on branch inspections and home offices will be approved by the Securities and Exchange Commission anytime soon, as FINRA plans to issue updated rule filings, Robert Cook, FINRA’s CEO, said Wednesday.

Speaking at the Securities Industry and Financial Markets Association’s Compliance and Legal conference, Cook said that FINRA has had a robust dialogue with the SEC about the controversial plans, and has received “a lot of great comments from the industry and others.”

FINRA, Cook continued, is “going to work with the commission to keep the constructive dialogue moving forward and create an opportunity for a new filing by us, an updated filing, that’s pulled together what we’ve been working on,” and then publish it for another round of comments.

The SEC has a statutory deadline to respond to FINRA’s Remote Inspection rule proposal by mid-April and the Residential Supervisory Locations proposal by the end of March. Both of the plans would amend FINRA’s Supervision Rule 3110.

FINRA’s most recent filing extends remote inspections through the end of this year.

The other plan would make changes to FINRA Rule 3110 to allow a home office to be considered a non-branch “residential supervisory location” under certain conditions. A residential supervisory location would become subject to inspections at least every three years, rather than annually.

The Public Investors Advocate Bar Association complained in December that the plan is “fundamentally flawed” and “leaves considerable opportunity for advisors working from home to skirt the rules.”

At the SIFMA event Wednesday, Cook said that “there’s a healthy conversation that’s continuing” about the plans, and that “it’s going in a constructive direction.”

“I think it’s been a pretty robust process of making sure we achieve our objective — which is, on the one hand, continue to preserve investor protection, make sure supervision is strong; on the other hand, to not be overly prescriptive about how work happens,” Cook said.

Melanie Waddell

@Think_MelanieW

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