Finra considers remote branch inspections, more BrokerCheck info

The exam proposal would apply to 'low-risk' branch offices, while the public database proposal would more closely resemble the SEC's Form ADVs

Oct 2, 2017 @ 11:46 am

By Mark Schoeff Jr.

The Finra board last week approved proposing rules to ease requirements for branch office reviews and to increase the amount of information available about individual brokers on the BrokerCheck public database.

Under the Financial Industry Regulatory Authority's examination proposal, a brokerage could conduct remote inspections of certain branch offices where "only low-risk activity takes place," states the meeting results posted on the Finra website on Sept. 29. The board meeting occurred on Sept. 26-27.

A branch office would be defined as low-risk if it does not handle customer funds or securities and has no more than three brokers working there, none of whom has a disciplinary event on his or her record.

The rule "would enable firms to reallocate compliance resources to activities that pose greater risks to investors," Finra President and Chief Executive Robert W. Cook wrote in the board update.


The BrokerCheck rule proposal is designed to enhance the database through several changes, including providing additional investment adviser information about dually registered individuals and firms, excluding information about deceased brokers and allowing firms to post comments about arbitration awards.

The proposal also would make available to the public "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," the meeting results state.

A Finra spokeswoman pointed to the information that the SEC makes available to the public from registered investment advisers' Form ADVs, which includes information about the advisory business, other business activities, custody and other disclosures, as the model that Finra intends to follow.

In his statement, Mr. Cook wrote that the change "would provide investors and others – subject to certain conditions – with expanded and more accurate access to certain specified information that is currently available through BrokerCheck."

The proposals will be released later and include comment periods. Ultimately, they will have to be approved by the SEC.


During the meeting, Mr. Cook also updated the board on Finra 360, an initiative he launched earlier this year in which the industry-funded broker-dealer regulator is conducting a self-examination of its policies and operations.

In a video about the board meeting, Mr. Cook said that Finra 360 has already resulted in incremental changes, such as lengthening the comment periods for rule proposals and enhancing disclosure on the Finra website about the board. Finra governance also was a topic covered in an in-depth InvestmentNews examination of Finra last month.

Mr. Cook said Finra is implementing reforms as Finra 360 proceeds rather than doing them all at the end.

"Little things matter," he said on the video. "We're beginning to do some tweaking around the committee structure, but we have more work to come."


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