Rather than comply with FINRA's renewed requirements around monitoring remote workplaces, major ... [+]
Wall Street brokerage firms, such as Barclays, Citigroup and HSBC, are requiring thousands of employees who were eligible to work from home to return to the office five days a week. One of the reasons for the RTO edict is that new regulations from the Financial Industry Regulatory Authority—a self-regulatory agency—now require the home offices of remote workers to be registered and inspected every three years under a new pilot program, Bloomberg reported.
With thousands of home offices around the country, the path of least resistance—rather than comply with these renewed requirements around monitoring remote workplaces—has led major banks to bring employees back into the office full-time.
During the pandemic, when staff was dispersed, the regulators were not able to pursue business as usual, checking up on branch offices. Now, the financial institutions are scaling back remote work options, although FINRA claims the banks’ decisions run counter to the motivations behind the new rules.
“Our new Residential Supervisory Location Rule and Remote Inspections Pilot Program Rule are intended to provide member firms greater flexibility—not less—to allow eligible registered persons to work from home, following the expiration of temporary COVID-19 relief from existing requirements,” FINRA said in a statement. “The new rules provide a practical and balanced way for firms to meet their regulatory obligations, while protecting investors, and acknowledging the need for greater workplace flexibility.”
The regulatory agency set out to provide clarity around misinformation surrounding the new rules, stating, “FINRA has seen recent statements from firms stating that new, stringent rules from FINRA will require them to bring their workforce back to the office full time. This is incorrect.”
It noted that “a location from which an associated person regularly conducts securities business on behalf of a member firm, including a home office, has always been subject to possible disclosure, registration and inspection under FINRA rules and applicable rules of other regulators.”
A Tightly Regulated Industry
The United States securities industry is one of the most highly regulated sectors. People who work on Wall Street, such as brokers, investment bankers, traders, money managers and compliance officers, are mostly required to take exams to demonstrate that they fully understand all of the pertinent rules and regulations. They need securities licenses such as the Series 7 and 24, among others, depending on the area of finance that they work in.
This is intended to ensure that clients are not taken advantage of and terrorist organizations are blocked from funneling funds through banks to carry out attacks, as well as to prevent insider trading, brokers who churn accounts and pump-and-dump schemes.
One of the ways that regulators, such as the Securities and Exchange Commission, FINRA and other regulatory bodies can oversee the industry is by conducting branch office examinations and audits. Regulators will pay a visit to offices to execute a review of their business to ensure that they are acting within the guidelines and not engaged in inappropriate and unlawful activities.
RTO Mandates
Barclays
In a significant policy shift, British banking behemoth Barclays has announced that thousands of its global investment banking employees will be required to work from the office on a full-time basis, according to an internal memo sent to employees last Thursday, Bloomberg reported. The note did, however, mark one exception: employees will be permitted to work remotely when traveling to meet with clients. The new policy is slated to go into effect on June 1.
Citigroup
Citigroup, headquartered in New York City, has announced a change in its work arrangements. Approximately 600 U.S. employees, who previously operated under a flexible work model, will now be mandated to work full-time from a Citi office location.
However, the majority of the bank’s workforce will be permitted to continue with hybrid work schedules. For the past few years, Citi employees were required to be physically present in the office for a minimum of three days per week.
HSBC
According to Mabel Rius, the head of human resources at HSBC, the bank's revised workplace policies will impact approximately 530 employees based in New York City—roughly half of the bank's workforce in that location.
Rius stated that HSBC is making concerted efforts to enable as many staff members as possible to maintain their hybrid work schedules, which combine onsite and remote work arrangements. However, she emphasized that the bank is not imposing a blanket requirement for all employees to be present in the office for five days a week.
Branch Office Examination Requirements
Residential Supervisory Location Designation
FINRA has adopted a new rule, effective June 1, that allows a private residence where an associated person performs certain supervisory activities to be treated as a non-branch location, subject to specific safeguards and limitations. This newly defined residential supervisory location (RSL) will be subject to regular inspections, at least every three years.
Broker-dealers must conduct and document a risk assessment and provide FINRA with a list of RSLs on a quarterly basis. The first RSL list, covering all locations designated as RSLs from June 1 through September 30, must be submitted to FINRA by October 15.
Remote Inspections Pilot Program
In addition to the new Residential Supervisory Location rule, FINRA has also adopted a rule that establishes a voluntary three-year Remote Inspections Pilot Program, effective July 1.
This Pilot Program allows eligible member firms to fulfill their inspection obligations for qualified branch offices, including Office of Supervisory Jurisdiction and non-branch locations, remotely without an onsite visit. However, banks must follow specific terms to participate.
To enroll in the Pilot Program, firms must provide FINRA with an "opt-in notice." Similarly, to withdraw from the program, an "opt-out notice" to FINRA is required.
