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FINRA Provides Guidance on Client Communications and Supervision During COVID-19 Pandemic

Because they are working from home and are not able to meet clients face-to-face due to COVID-19 restrictions, many registered representatives are communicating with clients via live audio or video conference meetings.  As a result, FINRA has provided guidance via their on-line forum on COVID-19/Coronavirus about how member firms should supervise these communications, as well as how firms should maintain the corresponding books and records. 

FINRA reminds member firms that they “must supervise registered representatives' live meetings with customers via video or audio conferencing platforms in a manner reasonably designed to achieve compliance with applicable securities laws and regulation and FINRA rules”.  There is no general rule for firms to record live audio or video meetings (unless required by FINRA Rule 3170).  However, FINRA points out that if, during the communication with the client, the registered representative “uses the chat or instant messaging feature of the platform or presents slides or other written (including electronic) communication, the member firm must keep records of these communications”.  Further, FINRA reminds all firms that these communications, whether with retail or institutional clients, “must be consistent with applicable standards such as FINRA Rule 2210 (Communications with the Public) and 3110(b) (Supervision)”.  Any recordings, whether by video or audio, may be requested in any regulatory inquiry.  

In its on-line forum, FINRA also addressed the issue of whether firm mail ordinarily delivered to a branch office may be forwarded to the personal residence of a registered representative.  FINRA indicated that the firm may choose to do so, but reminds firms they “must ensure that it has implemented a supervisory structure reasonably designed to supervise the activities of its associated persons, including implementing controls for the handling of customer correspondences received so that a principal may complete the appropriate reviews.”  FINRA also reminds firms that they must “document any new procedures that vary from its written supervisory procedures”.  Additionally, firms should always consider the risks associated with forwarding firm business correspondence to a personal residence, including “the retention and reporting of customer complaints, the handling of customer non-public information and the possible net capital implications of checks received”.

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Author

David L. Ward is a Mintz attorney whose practice includes financial services regulatory matters, internal investigations, and securities-related litigation in state and federal courts. He represents financial services clients before the US Department of Justice, SEC, FINRA, and other regulators.