FINRA officials think that brokers who work from home shouldn't necessarily have their residential addresses listed online for everyone to see.
The latest rule proposal being mulled by the broker-dealer industry's self-regulator would let brokers who work out of private residential offices keep their addresses from appearing in FINRA's online BrokerCheck database. That online trove provides a large variety of information on brokerage firms and individual brokers, including their locations and whether they've been the subject of customer complaints.
FINRA CEO Robert Cook told an audience at his organization's annual conference in Washington, D.C., this week that regulators plan to propose further changes to rules meant to let brokers operate at a distance from their home offices. A FINRA spokesman later confirmed that one idea up for consideration would prevent addresses that brokers identify as belonging to their private residential offices from appearing in the online BrokerCheck database.
The spokesman said investment advisors registered with the Securities and Exchange Commission, which also oversees FINRA, are already allowed to have the addresses of their home offices suppressed in the comparable Investment Adviser Public Disclosure database. FINRA's proposal, set to be submitted to the SEC soon, would merely apply the same rule to the brokerage side of the wealth management industry.
Hugh Berkson, president of investor interest group Public Investors Advocacy Bar Association, said he understands the desire for residential privacy. At the same time, he said, if brokers choose to work from home, he wonders if clients have an interest in knowing what sort of office.
"Say, for example, the advisor brags that he or she is successful beyond imagination, but the diligent investor uncovers the fact that the advisor actually lives in a very, very modest neighborhood," Berkson said in an email. "That disparity could be important as the investor decides to what degree they will trust the advisor."
Despite such skepticism, other FINRA officials confirmed at the annual conference that they remain committed to ensuring brokers can still operate at a distance from their home offices.
"Some people have a burning need to be able to work from home and to be able to do their job from home," Robert Colby, FINRA executive vice president and chief legal officer, said during a panel discussion Thursday with the agency's senior officers. "And we are convinced we have identified supervisory activities that can be done from home effectively."
Colby's remarks came several weeks after FINRA once again made revisions to two proposals meant to accommodate brokers who want to work remotely.
Both proposals have elicited opposition from groups like PIABA and the North American Securities Administrators Association, which represents state and provincial regulators in the U.S., Canada and Mexico.
Colby said that even though FINRA has learned about remote supervision in the past three years, its policies likely still need tweaks. The pilot program should give regulators a better sense of what changes are still needed.
Colby said some people were already working remotely when COVID-19 hit. But that in no way made the industry ready for what was about to happen.
"We walked into the COVID period without any preparation whatsoever," Colby said.
Colby also confirmed that FINRA plans to look again at two long-standing topics of concern: brokers' outside business activities and limits on gifts to or from clients. With gifts, FINRA now sets a $100 limit on how much can be given to a client or received from one in a year.
Colby suggested that number needs to be adjusted for inflation, although he did not specify by how much. FINRA also allows for exceptions for gifts given for weddings, the birth of a child or other purposes outside a business relationship.
As for outside business activities, FINRA's current rules now often call on brokerages to monitor representatives' side hustles for possible conflicts of interest. Regulators over the years have considered paring back the types of outside business that must be reported.
Colby acknowledged the industry has struggled to strike the right balance with the supervision of outside business activities.
"Firms want to know what their reps are doing," he said. "They don't want to be surprised by some activity that's going on in the background. But they don't want to necessarily have to approve or supervise all those activities."
