FINRA Proposal Would Permit Private Homes to Serve as Non-Branch Offices
From the Desk of Jim Eccleston at Eccleston Law.
The Financial Industry Regulatory Authority (FINRA) has filed proposed changes to FINRA Rule 3110 with the Securities and Exchange Commission (SEC).
The revision to Rule 3110 would permit a home office to be classified as a non-branch “residential supervisory location” under certain conditions. According to FINRA, Residential Supervisory Location under FINRA Rule 3110 “would align FINRA’s definition of an office of supervisory jurisdiction (OSJ) and the classification of a location that supervises activities at non-branch locations with the existing residential exclusions set forth in the branch office definition to treat a private residence at which an associated person engages in specified supervisory activities as a non-branch location, subject to safeguards and limitations.”
A “residential supervisory location” also would become subject to examinations based on a periodic schedule, according to FINRA. Sources anticipate that inspections will occur at least every three years in comparison to the annual inspections required at other supervisory branch offices. According to FINRA’s proposal, “residential supervisory locations” would additionally be subject to several rules, such as:
- that only one associated person can conduct business at the location;
- that the location is not held out to the public as an office;
- that no customer funds or securities are handled there;
- that the associated person is assigned to a specific branch office;
- that all electronic communications are made through the member’s electronic system; and
- that books and records must be maintained.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
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