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Will FINRA return to in-person inspections?

by | Aug 31, 2021 | Securities Litigation

The Financial Industry Regulatory Authority (FINRA), like every other industry in the country, was forced to make some changes as a result of the COVID-19 pandemic. According to the regulator, although it remains fully operational it is using remote work capabilities to function within the organization as well as for the completion of inspections.

How has FINRA adapted to the pandemic?

In November of 2020, FINRA agreed to use remote inspection methods. The measures were passed in an effort to help better protect those within the broker-dealers’ offices as well as the FINRA inspectors from exposure to COVID-19.

The regulator was considering a return to in-person inspections in the near future but has received some push-back from the Securities Industry and the Financial Markets Association.

Why the push to return to in-person inspections?

In part because the relief was temporary and is set to expire on December 31. As a result, the regulator will likely need to review the measures and either issue an extension or prepare for a return to in-person inspections in 2022.

Will FINRA extend the use of remote inspections?

The Financial Services Institute is one of many pushing the regulator to consider permanently implementing remote inspections. Those in favor of this method argue that the use of an in-person, physical inspection is a “relic of a bygone era.” And it appears FINRA execs are listening. According to a recent post in the Financial Advisor, FINRA chief executive Robert Cook has stated that they are in conversation with the Securities Exchange Commission (SEC) about extending the use of remote inspections into next year.

Although this does not signal a permanent change, it is one more step in that direction.

What does this mean for business that operate in this market?

It is important to keep current of FINRA’s expectations to better ensure compliance, including how they will conduct current and future inspections.

Commercial LitigationSecurities LitigationWill FINRA return to in-person inspections?
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