Finra Chief Executive Robert W. Cook said Thursday he wants the broker-dealer regulator to allow brokerages to supervise personnel remotely into next year.
During the coronavirus pandemic, the Financial Industry Regulatory Authority Inc. implemented temporary rules that relieved member firms of the requirement to conduct onsite inspections of branch offices. The organization said the challenges posed by the outbreak made in-person examinations impractical.
The relief, which began in 2020, will expire in December. But many brokerages are continuing to operate remotely. The situation is spurring Finra to rethink supervision obligations.
“What I’d like to see happen here is that we would extend [the relief] into next year and that we would step back and look at that [supervision] rule holistically and think about whether it could use some updating to accommodate a thoughtful, risk-based approach to when in-person exams would be necessary,” Cook said during an appearance at the Securities Industry and Financial Markets Association online compliance conference.
Cook emphasized that he was expressing his own opinion and that Finra has “a lot of work to do with other stakeholders.” Finra rule changes must be approved by the Securities and Exchange Commission.
“We’re actively engaged in conversations with SEC staff to explore whether some type of extension of relief into 2022 would be appropriate,” Cook said.
The temporary suspension of in-person office inspections was originally due to end last March, but the brokerage industry pushed Finra for more time, and the rule was continued through the end of this year.
The prospect of a further extension gained enthusiastic support on Thursday from SIFMA, which is one of the largest trade associations representing the financial services industry.
“We stand ready to help with that,” Ira Hammerman, SIFMA executive vice president and general counsel, told Cook during his session at the online conference.
Cook didn’t provide a timeline for when an extension might be approved.
“We’re pushing forward with these conversations with all deliberate speed and hope to provide some clarity as soon as we can,” he said.
The pandemic has roiled the normal operations of most brokerages, which have adapted to a work-from-home environment that has affected how they deal with employees, customers and regulators. Finra solicited public comment earlier this year on whether it should consider rule changes based on lessons learned during the pandemic.
“We want to look at our rulebook and figure out: Does it make sense?” Cook said. “Are there regulations that really aren’t necessary anymore? And, on the other side, are there areas where further guidance or rules would be helpful to achieving our collective goal of making sure there’s really good supervision of activities going on wherever they’re happening?”
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