Amid the current climate of expectations around flexible work, highly regulated industries can face unique challenges in finding the right balance between onsite, hybrid, and remote that works best for organizations, employees, and regulators.
Earlier this year, the Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms doing business in the United States, announced the expiration of temporary relief from previous requirements and a new set of rules affecting remote work. FINRA explained that the intent of its Residential Supervisory Location (RSL) Rule and Remote Inspections Pilot Program Rule was to create a “practical and balanced way for firms to meet their regulatory obligations, while protecting investors, and acknowledging the need for greater workplace flexibility.”
As financial firms and other regulated enterprises consider work policy adjustments, those that are most successful are following the same change management best practices as regulatory bodies, including consulting with stakeholders, providing guidance, and issuing clarifications when needed.
What is FINRA?
FINRA is a private corporation that acts as a self-regulatory organization. It is the largest independent regulator for all securities firms doing business in the United States. Although it is not part of the government, Congress has authorized it to protect America’s investors.
Purpose and role
- Regulation and oversight: FINRA oversees business between brokers, dealers, and the investing public. Its primary goal is to protect investors by ensuring the securities industry operates fairly and honestly.
- Rulemaking: FINRA writes and enforces rules governing the activities of its members, which include brokerage firms and their registered representatives.
- Market integrity: It monitors trading to detect and prevent market manipulation and other fraudulent activities.
Key functions
- Examinations and enforcement: FINRA conducts examinations of member firms to ensure compliance with its rules and federal securities laws. It also investigates and disciplines firms and individuals who violate these rules.
- Education and training: The organization provides educational resources and training for investors and industry professionals to promote financial literacy and compliance.
- Dispute resolution: It offers a forum for resolving securities-related disputes between investors, brokerage firms, and individual brokers through arbitration and mediation.
Regulatory framework
- Rules and regulations: FINRA has a comprehensive set of rules that cover areas such as advertising, sales practices, supervision, and record-keeping.
- Compliance: Member firms are required to comply with FINRA’s rules and regulations, as well as federal securities laws.
Brokerage firms must become members of FINRA to conduct business in the securities industry, and member firms are required to report certain activities and transactions to the regulator. Understanding FINRA’s role and rules is crucial for anyone involved in the securities industry, as it maintains the integrity of the financial markets and protects investors.
What did FINRA initially announce about remote work requirements?
In late January of 2024, FINRA published Regulatory Notice 24-02 (RN 24-02) announcing key dates and considerations for Residential Supervisory Location (RSL) and a pilot program, Remote Inspection Pilot Program. The new rules give FINRA member firms more flexibility when structuring supervisory systems.
Under new Rule 3110.19 (RSL), member firms can treat a private residence at which an associated person engages in specified supervisory activities, subject to certain safeguards and limitations, as a non-branch location for which inspections must be conducted on a regular periodic schedule instead of the currently required annual inspections.
The pilot program creates a voluntary three-year remote inspections pilot program to allow eligible member firms to fulfill their Rule 3110(c)(1) inspection obligations remotely, without an on-site visit, subject to specific terms, including:
- Risk assessments for each location
- Disqualification of certain locations
- Quarterly reporting obligations
And with the sunsetting of the temporary relief from in-person inspections, firms will no longer be able to rely on Rule 3110.17.
FINRA statement on its new rules for evolving work models
In May 2024, FINRA issued a statement to clarify the new residential supervisory location rule, reiterating that the new programs are intended to provide more flexibility after the end of the temporary relief from existing regulations, pushing back on the idea that the new rules should be a justification for any return-to-office plans.
“FINRA notes that a location from which an associated person regularly conducts securities business on behalf of a member firm, including a home office, has always been subject to possible disclosure, registration and inspection under FINRA rules and applicable rules of other regulators. The COVID-19 pandemic prompted FINRA to provide member firms with temporary relief from many of these requirements.”
The organization also spoke about the process of creating the new programs: “After a three year plus rulemaking process on our new rules, during which FINRA engaged in substantial outreach to member firms, FINRA informed member firms in January that the temporary relief would come to an end on May 30, 2024, a year after the official end of the pandemic.”
The statement had a list of resources for member firms that want to learn more about the changes and join the pilot programs for remote inspections.
What are the key takeaways for workplace leaders in highly regulated industries?
It can be challenging to find the best balance of onsite, hybrid, and remote work models that maximize productivity and profits while also maintaining regulatory compliance.
On top of the training, tech, and vigilance that goes into compliance, companies need to consider the employee experience, work-life balance, current and future commercial real estate portfolios, and the ability to attract and retain talent. Companies need work models that empower employees to do their best work, while also allowing the organization to see ongoing returns on their investments in office space and other facilities.
FINRA’s new pilot program is a good example of how solving complex workplace challenges requires the right technology. For companies that are interested, remote and hybrid workers can continue to work from a home office if they enroll in remote inspections.
In fact, modern intelligent worktech offers ways to streamline many existing workflows and even create new ones across an enterprise. Visitor management gets employees and visitors past the lobby and into their desks faster. Desk and room booking software makes it much easier for employees to connect and collaborate in the office. And with sensors and Internet of Things devices, workplace leaders can capture and leverage data from space planning and capital planning to maintenance scheduling and tracking. With the right technologies, companies can find solutions that support everyone.
By Jonathan Davis
Jonathan writes about asset management, maintenance software, and SaaS solutions in his role as a digital content creator at Eptura. He covers trends across industries, including fleet, manufacturing, healthcare, and hospitality, with a focus on delivering thought leadership with actionable insights. Earlier in his career, he wrote textbooks, edited NPC dialogue for video games, and taught English as a foreign language. He holds a master's degree in journalism.
