Update: FINRA Board of Governors Meeting
The FINRA Board of Governors met this week, and I am writing to share with you several updates from our discussions.
First, the Board authorized publishing for comment two proposed rulemaking items. One would permit firms to use technology to conduct remote inspections of offices engaged in certain low-risk activities, which in turn would enable firms to reallocate compliance resources to activities that pose greater risks to investors. The other 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.
A summary of these two proposals is included below. As is our general practice, we will issue Regulatory Notices requesting comment on both proposals and consider the comments carefully before determining the next steps. The proposals would then need to be filed with the SEC for additional notice and comment, and then be approved by the SEC before they would become effective.
In addition to the rulemaking items, the Board discussed potential changes to FINRA’s advisory committees based on feedback from the Special Notice on engagement. There are a few targeted immediate steps that we will take in response to this feedback, including updating the enabling charters of some committees to broaden their authority and allow more flexibility with respect to membership. Over the coming months, we will continue our review of the advisory committee structure and operations in light of the feedback from the Notice, and discuss further potential changes with the Board.
In addition, the Board received an update on the FINRA360 initiative, including progress on the previously announced integration of our enforcement programs and preliminary recommendations regarding other aspects of our organization. We had an initial discussion of some proposals provided earlier this week by the Small Firm Advisory Board related to BrokerCheck. The Board received a presentation on FINRA’s work in the area of investor education. We also discussed FINRA’s ongoing market surveillance and oversight activities. And the Board also held preliminary discussions regarding its budget for 2018, including the guiding principles that should inform this budget. The Board will approve the 2018 budget at its December meeting.
For more information about the discussions that took place at the September 2017 Board of Governors meeting, watch the September 2017 Board Report Video. And as always, I look forward to continuing to update you on Board activities in the future.
Robert W. Cook
President and CEO
Rulemaking Items Discussed at the September 2017 Board Meeting
Remote Office Inspections
The Board authorized publication of a Regulatory Notice soliciting comment on proposed amendments to FINRA Rule 3110 (Supervision) to provide members the flexibility to remotely conduct office inspections of “qualifying offices” where only low-risk activity takes place. Among other conditions, a “qualifying office” would be limited to no more than three associated persons—none of whom has a “disciplinary history” or is subject to statutory disqualification—and no customer funds or securities could be handled at the location. Under the proposal, a member firm that wishes to conduct remote inspections would be required to have policies and procedures reasonably designed to determine whether a location is eligible for remote inspection as a “qualifying office” and to assess whether a remote inspection of any such office is reasonable.
The Board authorized publication of a Regulatory Notice soliciting comment on proposed amendments to Rule 8312 (FINRA BrokerCheck Disclosure). Specifically, the amendments would: (1) provide additional investment adviser information through BrokerCheck about individuals and firms with broker-dealer and investment adviser registrations; (2) make publicly available limited data sets of BrokerCheck information on individuals, similar to what is currently provided by the SEC through the Investment Adviser Public Disclosure site; (3) exclude from BrokerCheck information about deceased individuals and certain information pertaining to individuals unregistered since 1999; and (4) allow firms to include in BrokerCheck a comment about arbitration awards pertaining to the firm.