A total of 741 member firms volunteered to participate in FINRA’s Remote Inspections Pilot Program, FINRA announced today in a blog post.
The pilot program provides eligible member firms with the flexibility to satisfy their inspection obligation without an on-site visit to the office or location, subject to terms that include conducting and documenting a risk assessment, and producing written supervisory procedures for conducting remote inspections and reporting inspection data to FINRA. The opt-in period for firms to participate in the initial phase of the pilot program ended on June 26, 2024. The initial phase of the pilot program started on July 1, 2024, and ends on Dec. 31, 2024.
“FINRA proposed in 2023 to create a voluntary, three-year Remote Inspections Pilot Program to evaluate the impact and efficacy of remote inspection of branches and offices by member firms. The idea for the pilot arose from trends FINRA saw in the use of technology and evolving business practices in compliance,” Greg Ruppert, Executive Vice President and Head of Member Supervision at FINRA and Jonathan Sokobin, Executive Vice President, Chief Economist and Head of the Office of Regulatory Economics and Market Analysis at FINRA, wrote in the blog post.
“The pilot will allow FINRA to collect evidence of the effectiveness of remote inspections. As discussed in the rule proposal, FINRA will use the pilot data to assess whether remote inspections may be part of a modernized supervisory system that reflects the hybrid work environment and the availability of technologies that did not exist when the on-site inspection was conceived. The first submission of data from the participants is due in mid-October,” Ruppert and Sokobin added.
The 741 participant firms represent 22% of FINRA member firms. Opt-ins are highest among large firms (500 registered representatives or more), with a participation rate of 60% in this category. Mid-size and small firm participation rates are 47% and 18% respectively.
Participant firms collectively cover 67% of all registered representatives and 53% of registered branches.
The deadline to opt-in to participate for Year 2 of the pilot program is Dec. 27, 2024. Year 2 of the pilot program will start on Jan. 1, 2025, and end on Dec. 31, 2025.
About FINRA
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. FINRA regulates one critical part of the securities industry—member brokerage firms doing business in the U.S. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.
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