Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Supplementary Material .19 (Residential Supervisory Location) Under FINRA Rule 3110 (Supervision)

The U.S. Securities and Exchange Commission (SEC) has published in the Federal Register a notice relating to a proposed rule amendment by the Financial Industry Regulatory Authority (FINRA) – please see EventID 20492 in this context for more information. Specifically, the Commission announced that it will launch proceedings „to determine whether „to approve or disapprove the proposed rule change, as modified by amendment No. 1, to adopt supplementary material .19 (Residential Supervisory Location) Under FINRA Rule 3110 (Supervision)“.
To recall, FINRA seeks to „adopt Supplementary Material .19 (Residential Supervisory Location) under FINRA Rule 3110 (Supervision)“ to add a new category entitled „Residential Supervisory Location“ for purposes of the rule. Thereafter, the private residence of associated persons engaged in specified supervisory activities would be treated as a non-branch location provided that certain conditions are met. Treatment as a non-branch location indicates that the residential location would be exempt from the yearly inspection requirements as mandated by the rule. Nonetheless, such locations would still be subject to periodic inspections of at least every three years.
The conditions that would have to be satisfied to qualify as a „Residential Supervisory Location“ include, but are not limited to the following:
– customer funds and assets are not handled at such location;
– the associated person refrains from meeting with customers at the location;
– all firm-related communication must be made via the firm’s own communication system; or
– books and other documents of the firm are not kept at this location.
Certain locations would be excluded from qualifying as „Residential Supervisory Locations“, for example, if the associated person is inexperienced (less than one year of work experience in supervisory functions), an investigation is underway towards the person; and / or if the person is subject to a „mandatory heightened supervisory plan“.
The SEC now seeks comments on whether or not it shall approve this proposed rule change. Comments are to be submitted up to August 1, 2023.