State regulators, PIABA continue to resist Finra’s plan for remote supervision

investmentnews.com:

State regulators and securities plaintiffs’ attorneys continue to resist a Finra plan that would allow brokerages to conduct remote supervision of their registered representatives.

In March, the Financial Industry Regulatory Authority Inc. released a proposal that would treat a home office from which a broker is supervising other reps as a non-branch location — or a residential supervisory location.

The measure, along with one that would establish a pilot program for remote branch office inspections, seeks to make permanent the online oversight of reps that became routine during the coronavirus pandemic, as firms use technology in lieu of in-person reviews.

After it received criticism during a public comment period last spring, Finraamended the proposal. The revised version modified the amount of experience a broker must have to supervise remotely; clarified that a location is ineligible for RSL status if a broker at the location is the subject of an investigation alleging supervisory failures; and required a firm to conduct a risk assessment of a location before designating it an RSL.

Last month, the Securities and Exchange Commission opened a comment period on the revised RSL proposal. The SEC must approve Finra rule changes. The comment period ended Tuesday. Rebuttal comments are due Aug. 15.

The feedback the agency received indicates the changes Finra made to the RSL proposal haven’t quieted the opposition.

The North American Securities Administrators Association, a group made up of state regulators, said Finra’s revisions “strike a more appropriate regulatory balance” but that the latest iteration still falls short.

The state regulators said Finra should require firms to review the RSLs frequently themselves.

“The