FINRA has supplemented its FAQs related to COVID-19 regulatory relief. Summaries of the new FAQs are provided below. Helpfully, FINRA has also provided a link to state “shelter-in-place” and “stay-at-home” orders.
Impact of Communication Disruptions – Implications for Firms. FINRA states that member firms should consider steps they can take to mitigate risks that may arise due to a reduced ability to communicate with customers, an inability to rely on mail, and other disruptions to communications with customers. This should include consideration of the impact these problems may have on supervisory control policies and procedures.
In particular, if registered representatives are unavailable to service customers, members are encouraged to place a notice on their websites indicating to affected customers who they may contact concerning trade execution, access to funds and securities and other concerns.
Advertising – Non-Promotional Communications and Filing with FINRA. FINRA reminds members that written communications that do not make any financial or investment recommendation or otherwise promote a product or service of the firm need not be filed with FINRA’s advertising department.
Best Execution. FINRA reminds members of the need to exercise “reasonable diligence” to ascertain the best market for a security and buy or sell in that market so that the resultant price to the customer is as favorable as possible under prevailing market conditions. For this purpose, reasonable diligence is assessed in the context of the characteristics of the security and market conditions, inducing price, volatility, relative liquidity, and pressure on available communications.
Filings Deadline Waivers and Clarifications. FINRA’s FAQs provide a number of waivers and/or clarifications regarding filings and deadlines.
- AML Annual Testing. FINRA reminds firms that the AML annual testing requirement under FINRA Rule 3310 must be completed on a “calendar-year basis.” This means that firms who must satisfy the AML annual testing requirement this year have until the end of the year, December 31, 2020, to do so.
- Form U4 and Form BR Updates Due to Temporary Relocations. As previously announced by FINRA in Regulatory Notice 20-08, FINRA is temporarily suspending the requirement to maintain updated Form U4 information regarding employment addresses for registered persons who temporarily relocate due to COVID-19 and, similarly, to file Form BR for any newly opened temporary office locations or space-sharing arrangement established as a result of recent events. Firms should, however, use their best efforts to provide written notification to their FINRA Risk Monitoring Analysts as soon as possible after establishing a new temporary office or space-sharing arrangement. Such notice should comply with the requirements specified in the applicable FAQ. FINRA does not expect to receive written notification regarding each registered representative working from home. FINRA reminds members that they should consider the risks associated with sharing office space, including risks related to customer privacy and information security and take steps to minimize such risks. FINRA also reminds firms to be mindful of the need to continue to comply with recordkeeping requirements.
- Annual Report and FOCUS Filings. Introducing brokers and other members that meet the exemptive provisions of SEA Rule 15c3-3(k) or otherwise file a Part IIA FOCUS Report are being provided a 30 calendar day extension for submitting annual reports related to fiscal years ending in January 2020 through March 2020. The procedures under interpretation /01 of SEA Rule 17a-5(m)(1) pertaining to audit extension requests are also waived for this purpose. Similarly, these same members are being provided a ten business day extension for submitting any FOCUS report related to a period ending in February 2020 through April 2020. Again, the extension request procedures are waived. This extension also applies to any applicable supplemental FOCUS schedules required pursuant to FINRA Rule 4524.
- Fingerprint Submission. FINRA is temporarily extending the period for submitting fingerprint information under FINRA Rule 1010(d). Specifically, members that submitted or will submit an applicant’s initial or transfer Form U4 between February 15, 2020 and May 30, 2020 will have until June 29, 2020 to submit the necessary fingerprint information.
- Manual or Wet Signatures on Form U4. FINRA is providing temporary relief from the requirement that members obtain a manual signature from any individual on whose behalf a Form U4 is being filed provided the applicable individual acknowledges in writing (which may be electronic) that the applicant has received and reviewed the completed Form U4 and that the Form U4 is accurate and complete. The member firm must also retain the written acknowledgement and obtain the manual signature as soon as practicable.
- Qualification Examinations. FINRA is extending expiring qualification examination windows until May 31, 2020. Individuals who were designated to function as principals under Rule 1210.04 prior to February 2, 2020 are given until May 31, 2020 to pass the appropriate examination(s).
- Rule 4530 Reporting Requirements. FINRA is extending the deadline for members to report statistical and summary information regarding written customer complaints for the first quarter of 2020 from the 15th of April to the 31st of May 2020.
- Rule 3120 Reports and Rule 3130 Certification. FINRA is extending the deadline for completing and submitting to senior management the report required under Rule 3120 that details a member’s supervisory control system. Members whose annual deadline for submitting the report falls between March 1 and May 1, 2020 have until May 31, 2020 to complete and submit the reports. Similarly, members whose Rule 3130 certification is due between March 1 and May 1, 2020 have until May 31, 2020 to complete the certifications.
- Regulatory Filings and Responding to Regulatory Inquiries and Investigations. More generally and as previously announced by FINRA in Regulatory Notice 20-08, except to the extent FINRA has provided more specific relief, members that require extra time with respect to filings and or responses should contact their risk monitoring analyst or relevant FINRA department to seek executions.