A total of 741 member firms volunteered to participate in FINRA’s Remote Inspections Pilot Program, FINRA has announced in a blog post.
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.
“We believe that the strong response to the remote inspection pilot is an example of how a self-regulatory organization like FINRA and our membership can work together successfully to promote learning to support effective and practical change,” 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 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,” said Ruppert and Sokobin.
“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,” they added.
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.
