FINRA Regulatory Guidance Provides Broker-Dealers Limited Relief Amid COVID-19 Outbreak

COVID-19 Update

Date: March 23, 2020

The Financial Industry Regulatory Authority (FINRA) has issued new guidance to broker-dealers with regard to the COVID-19 outbreak that provides limited regulatory relief and guidance on implementing business continuity plans (BCPs).

In Regulatory Notice 20-08 (Notice), FINRA reminds firms of their obligations pursuant to FINRA Rules 4370 and 4380 to maintain a BCP and provide FINRA with up-to-date emergency contacts. The Notice highlights areas of particular concern in light of the COVID-19 pandemic, including remote office arrangements and teleworking, technological infrastructure and cybersecurity, and communications with customers and FINRA. The Notice encourages firms to review their BCPs with these issues in mind and contact their FINRA risk monitoring analyst before activating their BCP to address any unique issues.

As detailed in the Notice, FINRA is suspending member firms’ obligations to provide updated Form U4 information regarding employment addresses for registered persons who are relocated due to COVID-19. Further, firms will not be required to submit branch office applications (Form BR) for any newly opened temporary office locations or space-sharing arrangements established as a result of COVID-19 and recent events. FINRA may also waive any late fees associated with untimely regulatory filings or responses to inquiries and investigations given the circumstances.

In addition to this limited regulatory relief, the Notice advises firms to:

  • test the broad use of any remote office or telework arrangement in advance of implementation;
  • ensure associated persons have access to critical firm systems, as well as adequate and secure internet connectivity; 
  • ensure adequate supervision of associated persons who are working in remote offices or teleworking; 
  • promptly notify their FINRA risk monitoring analyst if the firm utilizes emergency office space that meets the definition of “branch office” but is not registered as such with FINRA;
  • ensure sufficient controls are in place to mitigate the risks associated with sharing office space with other entities;
  • provide educational materials and training to all personnel concerning the detection and avoidance of cyber threats;
  • employ additional security measures, including two-factor authentication for access to remote environments;
  • ensure control procedures that provide for ongoing communication with, and account access for, customers in the event of business disruptions; and
  • monitor regulatory filings, inquiries and investigations and promptly seek extensions of time.

In addition, FINRA has administratively postponed all in-person arbitration and mediation proceedings scheduled through May 1, 2020. However, this postponement does not affect other case deadlines and those must be timely met unless the parties jointly agree otherwise.

Similarly, FINRA has also postponed hearings of Disciplinary Proceedings scheduled through April, except for pending Expedited Proceedings, which are to be conducted remotely. During this time, the Office of Hearing Officers will serve and accept service of notices, pleadings and other documents by email. Again, the postponement does not affect other case deadlines.

Finally, FINRA is providing courtesy cancellations for upcoming qualification exam appointments and will extend a candidate’s existing enrollment period as necessary.

FOR MORE INFORMATION

For more information, please contact:

Riccardo M. DeBari
212.908.3975
Riccardo.DeBari@ThompsonHine.com

Brian Lanciault
212.908.3945
Brian.Lanciault@ThompsonHine.com

ADDITIONAL RESOURCES

We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our COVID?19 Task Force web page for additional information and resources.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

© 2020 THOMPSON HINE LLP. ALL RIGHTS RESERVED.