New FINRA Home Office Rules Take Effect in June

On June 1, firms may start using the RSL designation, FINRA said. The first RSL list is due to FINRA on Oct. 15, 2024, covering all locations firms designate as RSLs during the period June 1, 2024, through Sept. 30, 2024.

FINRA states that it’s “currently developing a technological process in FINRA Gateway through which firms will be able to identify their RSLs and meet the obligation to provide their quarterly RSL lists to FINRA in an efficient manner.”

FINRA said it expects the tech process to be ready no later than May 31.

In July, FINRA filed to amend its residential supervisory location plan to include more stringent eligibility criteria.

Rule changes to amend Rule 3110 include:

• Adjusting the location ineligibility criteria pertaining to an associated person with less than one year of supervisory experience to also be satisfied by experience at a member firm’s affiliate or subsidiary that is registered as a broker-dealer or investment adviser;
• Clarifying the scope of the location ineligibility criteria pertaining to an associated person who is the subject of an investigation or proceeding by a regulator relating to an allegation of a failure to supervise by defining these terms as they are defined on Form U4 (Uniform Application for Securities Industry Registration or Transfer Registration) and address the applicability of the proposed exclusion when an investigation has remained pending for a period of time; and
• Requiring a firm to conduct and document a risk assessment for each office or location before designating such office or location as a residential supervisory location, including a non-exhaustive list of factors to consider as part of that risk assessment.

Remote Inspections

FINRA Rule 3110.18 sets up a voluntary, three-year remote inspections pilot program “to allow eligible member firms to fulfill their Rule 3110(c)(1) inspection obligation of qualified branch offices, including OSJs and non-branch locations remotely, without an on-site visit to such offices or locations, subject to specified terms,” FINRA explains.

A firm must affirmatively elect to participate in the Pilot Program by providing FINRA with an “opt-in notice” and once enrolled, must affirmatively elect to withdraw from the Pilot Program by providing FINRA with an “opt-out notice.”

FINRA states that it’s currently developing a technological process in FINRA Gateway through which firms will be able to provide FINRA the requisite notices electronically, and that further details about the manner and format of these notices will be released in subsequent guidance.

Under Rule 3110, FINRA requires its member firms to inspect:

• Offices of supervisory jurisdiction and non-OSJ branches that supervise non-branch locations at least annually;
• Non-supervising branch offices at least every three years; and
• Non-branch offices periodically.