FINRA Tightens Work-From-Home Rule Plan for Brokers

The Public Investors Advocate Bar Association, a group of lawyers who represent investors in disputes with the securities industry, complained in December that the plan was “fundamentally flawed” and “leaves considerable opportunity for advisors working from home to skirt the rules.”

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

The refiled Residential Supervisory Location (RSL) proposal is similar to the 2022 version in many ways, FINRA’s filing states, but the new changes:

• enhance the conditions for RSL designation relating to books and records to provide, among things, that records are not physically or electronically maintained and preserved at the location;
• expand the list of criteria that would make a firm ineligible. For instance, a member firm has been suspended or a firm has been a FINRA member for less than 12 months;
• adjust the ineligibility criterion that would make an office or location ineligible where an associated person is the subject of an investigation or other action relating to a failure to supervise; and
• require firms to provide, on a quarterly basis, a current list to FINRA of all locations designated as RSLs.

The SEC has 240 days from the date of the proposal’s publication in the Federal Register to approve or deny FINRA’s plan.