FINRA Introduces Remote Testing Enhancements

In 2025, the Financial Industry Regulatory Authority (FINRA) has implemented significant enhancements to its remote testing and supervision frameworks, reflecting the evolving landscape of the financial industry and the increasing prevalence of remote work.

🖥️ Remote Inspections Pilot Program (Rule 3110.18)

Effective July 1, 2024, FINRA launched a three-year Remote Inspections Pilot Program under Rule 3110.18. This program allows eligible member firms to conduct remote inspections of certain offices and locations, replacing the traditional on-site inspections mandated by Rule 3110(c)(1). To participate, firms must:Compliance Risk Concepts+10FINRA+10Jackson Lewis+10

• Conduct and document a comprehensive risk assessment for each office or location.
• Develop and maintain written supervisory procedures outlining the methodology for remote inspections.
• Submit specified data and information to FINRA, including quarterly reports and findings from remote inspections.FINRA+2FINRA+2ACA Group+2FINRA+2FINRA+2ACA Group+2

Firms interested in joining the Pilot Program for the 2025 calendar year (Pilot Year 2) were required to opt in by December 27, 2024. Once enrolled, firms are automatically considered participants for subsequent years unless they submit an opt-out notice before the end of the current Pilot Year. FINRA+4FINRA+4Jackson Lewis+4ACA Group+3FINRA+3Jackson Lewis+3

🏠 Residential Supervisory Locations (Rule 3110.19)

Complementing the Remote Inspections Pilot Program, FINRA introduced Rule 3110.19, which permits member firms to designate private residences as Residential Supervisory Locations (RSLs). This designation allows supervisory personnel to perform certain supervisory functions from their homes without the location being classified as a branch office or Office of Supervisory Jurisdiction (OSJ). However, RSLs are subject to specific conditions and limitations, including:ACA Group+11Jackson Lewis+11FINRA+11

• The associated person must not engage in activities requiring registration as a principal at the RSL.
• The firm must maintain records of the supervisory activities conducted at the RSL.
• The RSL must be subject to inspection at least once every three years, either remotely (if participating in the Pilot Program) or on-site.FINRA+2Global Financial Regulatory Blog+2Jackson Lewis+2FINRA+4Jackson Lewis+4FINRA+4

Firms are required to identify RSLs in the Uniform Application for Securities Industry Registration or Transfer (Form U4) and maintain an updated list of such locations. FINRA

🔍 Implications for Firms and Professionals

These regulatory enhancements aim to provide greater flexibility for firms and associated persons, accommodating the shift towards remote work while maintaining robust supervisory standards. Firms must carefully assess their eligibility and readiness to participate in the Remote Inspections Pilot Program and to designate RSLs, ensuring compliance with all applicable requirements.

For professionals preparing for FINRA exams, understanding these developments is crucial, as questions related to supervisory structures and compliance obligations may reflect these changes.