FINRA has just launched a broad review of regulatory requirements applicable to member firms and associated persons with regard to workplace arrangements. 

In connection with this launch, FINRA has requested public comment on the scope of its review and its approach to rule modernization when it comes to the modern workplace as an area of focus, from the topic of branch offices and hybrid work to digital communications and recordkeeping to investor fraud.

The comment deadline is June 13, 2025.

FINRA specifically focused on the digital platforms, AI tools and communication channels member firms are offering investors and other market participants in terms of sharing information, executing transactions, transferring accounts, and notifying customers, among other services.

Below is a sampling of the areas it has requested information about from members.

Branch offices, hybrid work

Although FINRA Rule 3110 (the Supervision Rule) is largely principles-based, it somewhat relies on categories of member offices (e.g., offices of supervisory jurisdiction (OSJ), branch offices, non-branch offices). 

FINRA notes in its Notice that as developments in technology have enhanced firms’ overall and ongoing supervision and monitoring of the activities occurring at offices, there is now an increased interest in reevaluating the prevailing office categories and their associated regulatory requirements. In addition, some firms have sought to provide broader flexibility to permit staff to work remotely at times.

FINRA asks firms to provide feedback on the impacts of modern technologies and compliance tools on the effective supervision of decentralized workplaces and evolving hybrid work arrangements. And it asks firms if the agency should adjust the Supervision Rule’s branch office and OSJ definitions, inspection requirements, and designation and registration of office, possibly modernizing them to eliminate unnecessary burdens or ambiguities while maintaining investor protection and market integrity.

Qualifications, continuing ed

FINRA observes in the Notice that securities regulators have historically required securities professionals seeking registration to demonstrate qualifications by passing a standardized professional examination.

And, once registered, individuals maintain their qualifications by completing a continuing education program that is used by all securities self-regulatory organizations so registered persons stay current as rules, industry standards and products evolve, helping members serve investors.

FINRA is now asking member firms about the tools they are leveraging to identify appropriate candidates for positions that require registration and if it should adopt, or modify and adopt, some of those practices, with an eye toward businesses offering more effective or efficient ways for individuals to demonstrate their qualifications.

Recordkeeping and digital comms

SEC Rule 17a-4(b)(4) requires a broker-dealer to preserve originals of all communications it receives and copies of all communications the broker-dealer sends (including inter-office memoranda and communications) relating to its business as such, including all communications with the public that are subject to the rules of the self-regulatory organization of which the broker-dealer is a member.

And FINRA rules (FINRA Rule 3120, in particular) require members to supervise their internal and external communications relating to their investment banking and securities business and retain records of such communications for the period specified in the rules.

Of course, over time, advances in technology have significantly expanded the channels through which members and their associated persons communicate and conduct their business, which raises questions about which communications the member must retain and how members should do so.

FINRA says it has observed, for example, associated persons engaging in business-related communications through digital channels that a member has not authorized for business use leading to the member not retaining or supervising those communications.

FINRA now asks several questions of firms in this area in its Notice:

• The phrase business as such under Exchange Act Rule 17a-4(b)(4) is not defined — is this problematic — and are there categories of records that are especially costly or difficult to capture or retain, and which may provide no appreciable regulatory benefit?
• What standards for the supervision of various digital communication channels have proved effective, including with respect to off-channel communications? What are some examples of such workable standards?
• What are members’ recordkeeping challenges regarding AI-generated communications and how do these challenges vary based on the type of AI-generated communication (e.g., AI-powered chatbot, AI-generated transcripts or summaries of meetings)?
• How do members approach recordkeeping, and any related challenges, with respect to dynamic information displayed on their website or digital platforms? How do members approach customer-related interactions and experiences (e.g., the account opening process) through their systems?
• Should FINRA consider any changes to the disclosure requirements under its rules to facilitate the use of modern communication channels (e.g., through layered disclosures)?

Fraud protection

FINRA said in the Notice that it has also worked with its members to develop rule-based tools to fight fraud, particularly with respect to senior and vulnerable adult investors. It created the first uniform national standard for placing temporary holds to address suspected financial exploitation (FINRA Rule 2165) and FINRA rules require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of all non-institutional customer accounts.

Since members have raised concerns that the time limits Rule 2165 specifies restrict their ability to protect customer assets when the financial exploitation is ongoing. So the agency now asks if it should further extend the temporary hold period in the rule and expand its reach beyond “specified adults” to any customer where there is a reasonable belief of financial exploitation.

Reminder

Again, comments must be submitted online, by email or in hard copy form by June 13, 2025.

Member firms should consider taking advantage of the opportunity to engage with the self-regulatory organization about the important and ever-evolving topic areas covered in the request.