FINRA Supervision Rule 3110 outlines certain criteria for branch and non-branch offices, and inspection requirements. During COVID, FINRA offered temporary relief regarding where associated persons were located since may were working in remote or who locations during the pandemic. As a result of COVID, there have been permanent changes in how people work. Many more people are working from home more often or completely.
As a result of this, we are providing additional guidance regarding what is considered a branch office and a non-branch location.
BRANCH OFFICES
FINRA defines a branch office as any location where one or more associated persons regularly conducts the business of effecting any transactions in or inducing or attempting to induce the purchase or sale of, any security, or is held out as such.
All locations, including residences, where securities business, as defined by FINRA, is conducted must be registered as a FINRA branch office and are subject to supervision via on-site examinations. This includes, but is not limited to, locations where:
- Files are maintained,
- Signage and/or advertising is used,
- It’s the sole location from which the RR does business,
- The RR spends the majority of their time (i.e., 3 or more days a week, more than two weeks out of a month, or more than 50% of the time),
- Mail is accepted,
- Non-appointment/walk-in business may be conducted, or
- Business cards/letterhead reflect the location.
If someone is partially retired and does not work a full work week, a location where they spend the majority of their time when they are working would be considered a branch.
NON-BRANCH LOCATIONS
FINRA defines several exemptions from the branch office registration requirement. While they are considered “non-branch locations,” they are subject to supervision, including on-site examinations (less frequently than branch offices). Since more individuals are working from home than before, the focus is on Primary Residence Non-Branch Locations. These locations must be disclosed to your Branch Office Supervisor and ESI Licensing, prior to engaging in activities at the location. Details of the Primary Residence Non-Branch Locations exemptions are on the attached Non-Branch Locations Exemption Reference Chart and include definitions, examples, and acceptable activities at these locations.
To qualify as a non-branch:
- The location may NOT fall into any of the categories listed under “Branch Offices” above.
- The location MUST fall within the exemptions listed on the Non-Branch Locations Exemption Reference Chart.
- A non-registered fingerprinted person (“NRF”) and non-producing RR (e.g. registered admin, non-producing supervisory designee, home office personnel) may work from home a majority or all of the time (as long as not engaging in any unacceptable activities). The non-branch location must be intended solely for customer service and/or back-office functions where no sales activities are conducted AND may not be held out to the public.
- A producing RR who spends a majority of their time at a registered location and regularly spends a portion of their time at another location (i.e., 2 or less days a week, less than two weeks out of a month, or less than 50% of the time)
If any of the above non-branch criteria cannot be met, the location must be registered as a branch office. If a producing RR’s primary residence is the only location from which the RR does business, it must be registered as a branch.
REPORTING OF BRANCH AND NON-BRANCH LOCATIONS
If your primary working location meets the definition of either a branch office or a non-branch location, but is not designated as such, please complete the Location Disclosure Form and provide it to your supervisor, who will review and forward it to ESI Licensing. ESI Licensing will review your request, determine the office type, and record the location for tracking and Firm records. Also, any change or closure of a branch or non-branch location must be reported promptly.
QUESTIONS
Please feel free to contact ESI Licensing at 800-344-7437 with any questions regarding the branch offices or non-branch locations.
TC133115(0423)1