Frequently Asked Questions about Residential Supervisory Locations (RSLs)

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Residential Supervisory Location Designation

Q1: What is a Residential Supervisory Location?

A1: In general, a Residential Supervisory Location (RSL) is a private residence from which an associated person engages in supervisory functions, including those described in FINRA Rule 3110(f)(1)(D), (E), (F) and (G), and FINRA Rule 3110(f)(2)(B). An RSL is a non-branch location (i.e., an unregistered office or non-registered location), which means that a firm does not need to register it as a branch office under Article IV, Section 8 of the FINRA By-Laws. As a non-branch location, a firm is required to inspect an RSL on a regular periodic schedule, presumed to be at least every three years, in accordance with FINRA Rule 3110(c)(1)(C) and FINRA Rule 3110.13. Prior to designating an office or location as an RSL, a firm must develop a reasonable risk-based approach to designating such office or location as an RSL and conduct and document a risk assessment for the associated person assigned to that office or location.

Q2: Is a firm required to use the RSL designation?

A2: No. Although a firm may be eligible to use the RSL designation, a firm is not obligated to use it for any or all eligible private residences. Note that private residence locations that meet the definitions of branch office or office of supervisory jurisdiction (OSJ) must be appropriately registered as a branch office or qualify for classification under one of the exclusions from the branch office definition under Rule 3110(f)(2)(A).

Q3: When is the first day a firm may begin to designate a private residence of an associated person as an RSL in accordance with Rule 3110.19?

A3: As announced in Regulatory Notice 24-02, the first day a firm may designate an associated person’s private residence as an RSL is June 1, 2024. The firm and the location must satisfy the conditions set forth in Rule 3110.19 prior to designation.

Q4: May an associated person work from more than one RSL?

A4: Yes. The RSL designation may apply to any private residence of an associated person from which supervisory activities occur, subject to the terms and conditions of Rule 3110.19.

Q5: Rule 3110(f)(2)(ii) uses the term “primary residence” and Rule 3110.19 uses the term “private residence.” Is there a difference between the two terms? 

A5: The term “private residence” as used in Rule 3110.19 is broader than the term “primary residence.” An associated person may have more than one “private residence,” but only one “primary residence.”

Q6.1: What jurisdictions will recognize an RSL designation? Updated

A6.1: For reference, firms may view the “SRO/Jurisdiction Fee and Setting Schedule – Web CRD” that includes a new “Accepts RSL” column that lists the jurisdictions and the NYSE to indicate the regulators that have accepted the RSL designation. See Form BR Explanation of Terms for the definition of “jurisdiction.” FINRA will continuously update this schedule as it receives updates from jurisdictions and the NYSE. This schedule is for reference purposes only. Firms are encouraged to contact their regulators directly to receive the most up-to-date information regarding applicable rules and regulations.

Q6.2: Does the NYSE recognize the RSL designation? Updated

A6.2: Yes, the NYSE has adopted the RSL designation. See Securities Exchange Act Release No. 101325 (October 15, 2024), 89 FR 84221 (October 21, 2024) (Notice of Filing and Immediate Effectiveness of File No. SR-NYSE-2024-64); see also the NYSE’s proposed rule change for immediate effectiveness to harmonize NYSE Rule 3110.19(d) with FINRA Rule 3110.19(d), as amended (File No. SR-NYSE-2024-73).

Updating Uniform Registration Forms – Form U4 (Uniform Application for Securities Industry Registration or Transfer) and Form BR (Uniform Branch Office Registration Form)

Q7: What uniform registration forms must be updated after the May 31, 2024 expiration of the temporary relief provided in Regulatory Notice 20-08, from the obligation of firms to maintain current information for employment addresses and branch offices on specified uniform registration forms?

A7: A firm is required to update the Office of Employment Address (OEA) in Section 1 of the Form U4 for its registered persons. A firm can enter more than one OEA for a registered person on the form. Further, if applicable, a firm must use Form BR to either appropriately register an office or location as a branch office or deregister the office or location as a branch office. Before making changes to branch office registration related to the RSL designation, firms should carefully review the additional FAQs on this topic under the heading “Enhancements to Form BR Functionality” below.

Q8: Does a firm have to register an RSL on Form BR? Updated

A8: No. As a non-branch location (i.e., unregistered office or non-registered location), an RSL need not be “registered” on Form BR as a branch office with FINRA, the NYSE, or a jurisdiction that accepts RSL designation. However, as noted in the FAQs below, some jurisdictions do not currently accept the RSL designation, in which case the firm would need to register or “notice file” the location in that particular jurisdiction as a branch office.

Also, FINRA reminds firms that they will be required to update an individual’s Form U4 to provide FINRA with the individual’s current Office of Employment (OEA) (both registered and unregistered, as applicable) and provide RSL information in accordance with Rule 3110.19(d). As explained in Q15.2/A15.2, starting on September 14, 2024, Form U4 includes a new question eliciting information to identify locations as RSLs.

Q9: Some of my firm’s associated persons who will work from RSLs began working from their private residences during the pandemic. For purposes of updating Form U4, should my firm update Form U4 using June 1, 2024 as the “Start Date” or the date those individuals first began working from those locations?

A9: Because June 1, 2024 is the first date on which a firm may use the RSL designation, the “Start Date” for a private residence to be treated as an RSL cannot be earlier than June 1, 2024.

Q10: Reserved

Q11: My firm will have associated persons working from multiple locations. Does Form U4 permit multiple address entries?

A11: Yes. Section 1 (General Information) of Form U4 allows for multiple office of employment addresses to be entered on the form. Using FINRA Gateway, addresses are entered by selecting “Add Registered Office of Employment Address” or “Add Non-Registered Office of Employment Address,” found within the “Office of Employment Address” section of “Registration Requests with Firms.”

Q12: If an associated person works from a branch office three days a week and a private residence two days a week on a regular schedule, is there an expectation that a firm must now capture on the Form U4 two OEAs—one for the branch office and the other for the private residence?

A12: Yes. If the physical office or location of a registered person meets the definition of an OSJ, branch office or an applicable exclusion from registration, it must be reflected on the individual’s Form U4. If the registered person’s physical location is at a branch office and at a private residence, both addresses must be listed as an OEA. Form U4 allows for multiple address entries.

Q13: Is the associated person designated to an RSL also required to be assigned to a registered office of the firm?

A13: Yes. In accordance with Rule 3110.19(a)(6), the associated person must also be assigned to a designated branch office, and such designated branch office must be identified on Form U4. The registered office location and not the private residence address of the associated person must be reflected on all business cards, stationery, retail communications and other communications to the public by such associated person.

Q14:  Can the “Supervised From” location identified on the Form U4 be an RSL?

A14:  No. The “Supervised From” location must be the office to which the supervisor is assigned. For some firms, such office may be the main office.

Compliance with Rule 3110.19(d) (Obligation to Provide Information Identifying RSLs to FINRA)

RSL Identification – Overview

Q15.1: If my firm allows its eligible associated persons to work from RSLs in accordance with Rule 3110.19, how must the firm provide FINRA with the quarterly list required under Rule 3110.19(d), with the first list due on October 15, 2024?

A15.1: See Q15.2/A15.2

Q15.2: What is the current status of the “RSL Question” on Form U4 that would allow member firms to comply with the requirement to provide FINRA with a quarterly list of RSLs in accordance with Rule 3110.19(d)? 

A15.2: Starting September 14, 2024, Form U4 includes a new question eliciting information to identify locations as RSLs (RSL Question). In addition, Rule 3110.19(d) has been amended to remove the reference to a “list of all locations designated as RSLs” (RSL List) and the associated quarterly timeframe for member firms to provide such list to FINRA, and replaced it with the requirement that member firms provide the information in the frequency, manner and format as FINRA may prescribe. 

Prior to the amendment, Rule 3110.19(d) required a member firm that elected to designate any of its offices or locations as an RSL to provide FINRA with an RSL List by the 15th day of the month following each calendar quarter in the manner and format (e.g., through an electronic process or such other process) as FINRA may prescribe.

As amended, Rule 3110.19(d) now requires a member firm that elects to designate any office or location of the member as an RSL pursuant to Rule 3110.19 to provide FINRA with current information identifying locations designated as RSLs in the frequency, manner and format (e.g., through an electronic process or such other process) as FINRA may prescribe. FINRA is prescribing that member firms provide RSL information to FINRA via Form U4’s new RSL Question. See File No. SR-FINRA-2024-015; see also Q15.6/A15.6.

Q15.3: What is the new RSL Question on Form U4? 

A15.3: Below is the text of the new RSL Question that now appears on Form U4: 

Residential Supervisory Location (RSL) Designation: Is this Office of Employment Address an RSL? O Yes O No

If “Yes” is selected, the firm confirms that this location is designated as an RSL as defined in FINRA Rule 3110.

See File No. SR-FINRA-2024-015.

A response to Form U4’s new RSL Question will be required when a Form U4 filer marks that an associated person’s office of employment address is a “non-registered” (i.e., non-branch) location and is a private residence through Form U4’s Private Residence Check Box. The RSL Question will prompt the Form U4 filer to respond as either “Yes” or “No” through a radio dial button. A “Yes” response will mean that the member firm has confirmed that the location has been designated as an RSL as defined in FINRA Rule 3110.

Q15.4: Who must answer the new RSL Question? 

A15.4: A firm that has designated an office or location as an RSL must respond “Yes” to the new RSL Question on Form U4 within the required timeframes provided in Q15.6/A15.6. In addition, a firm that has a non-registered (i.e., non-branch) location that is marked as a private residence through Form U4’s Private Residence Check Box, but for which the firm has not designated as an RSL, must respond “No” to the new RSL Question on Form U4 within the required timeframes provided in Q15.6/A15.6. In sum, a Form U4 filer that marks an associated person’s office of employment address as a “non-registered” (i.e., non-branch) location and as a private residence through Form U4’s Private Residence Check Box will be required to answer the RSL Question as either “Yes” or “No.” A “Yes” response will mean that the member firm has confirmed that the location has been designated as an RSL as defined in FINRA Rule 3110.

Q15.5: Given the amendment to Rule 3110.19(d) and the addition of the new RSL Question on Form U4, are member firms that use the RSL designation still required to provide FINRA with an RSL List? 

A15.5: No. Rule 3110.19(d), as amended, no longer requires member firms to provide FINRA with an RSL List since RSL information will be captured through the RSL Question on Form U4. Firms must instead comply with paragraph (d) by responding to the RSL Question on Form U4 within the timeframes provided in Q15.6/A15.6. See File No. SR-FINRA-2024-015.

Q15.6: Do the amendments to Rule 3110.19(d) and Form U4 impact the October 15, 2024, date that FINRA announced in Regulatory Notice 24-02? 

A15.6: Yes. The previously announced October 15, 2024 due date in Regulatory Notice 24-02 for the first RSL list has been replaced by the December 26, 2024 deadline described below. Responding to the new RSL Question on Form U4 is the means FINRA is prescribing for member firms that designate a private residential non-branch location as an RSL to comply with amended Rule 3110.19(d). 

While the RSL Question is part of Form U4 starting on September 14, 2024, the RSL Question will be implemented on November 26, 2024. Notwithstanding the November 26, 2024, implementation date, member firms, on a voluntary basis, are able to answer “Yes” or “No” to the RSL Question starting on September 14, 2024.

On or after November 26, 2024, a member firm that has marked an associated person’s office of employment address as a “non-registered” (i.e., non-branch) location and such location is marked as a private residence through the Private Residence Check Box on Form U4, must provide either a “Yes” or “No” response to the RSL Question in accordance with the 30-day timeframe set forth in Article V, Section 2 of the FINRA By-Laws. Thus, December 26, 2024, is the date by which an associated person’s Form U4 must be updated with the RSL Question answered as either “Yes” or “No,” if the member firm has not already done so before the November 26, 2024, implementation date.

The chart below sets out the timeframes for a firm to answer “Yes” or “No” to the RSL Question:

Date Member Firm Determines Whether the Non-Registered Private Residence Location is or is not an RSL* Date Member Firm Response to the RSL Question on Form U4 as “Yes” or “No” is Due 
From June 1, 2024 (effective date of Rule 3110.19) through November 25, 2024Required by December 26, 2024**
On or After November 26, 2024Required within 30 days of RSL designation in accordance with FINRA By-Laws

NOTE: The CRD/IARD system shuts down for the year at 6 p.m. ET on December 26, 2024. Firms should ensure that they submit their responses to the RSL Question on Form U4 before the shutdown occurs.

* The member firm must first have indicated on the associated person’s Form U4 that the office of employment address is a non-registered (i.e., non-branch) location and a private residence by checking the “Private Residence Check Box.” See Form U4 Instructions, Section 1 (General Information) (directing a filer to “Check this [Private Residence Check Box] if the Office of Employment address is a private residence.”); see also Section 6 (Registration Requests with Affiliated Firms).

** Prior to the November 26, 2024, implementation date, member firms may begin responding to the RSL Question on Form U4 on a voluntary basis from the date the RSL Question becomes available on Form U4. The RSL Question is available starting on September 14, 2024.

See also File No. SR-FINRA-2024-015.

Q15.7: Is a member firm required to report a location that was previously designated as an RSL on or after June 1, 2024, but was closed prior to the December 26, 2024 reporting deadline because the member firm terminated the associated person’s registration and filed a Form U5 (Uniform Termination Notice for Securities Industry Registration)?

A15.7: No. Where the member firm has closed a location previously designated as an RSL on or before the December 26, 2024 reporting deadline, the member firm is not required to report the location through Form U4. Nevertheless, the member firm must maintain that location’s RSL information in the firm’s internal records.

Q15.8: On June 1, 2024, a member firm designated an associated person’s private residence as an RSL. Before the December 26, 2024 reporting deadline, the member firm determined that the private residence should no longer be designated an RSL, but determined that the private residence qualified as a non-branch location under Rule 3110(f)(2)(A). Given the member firm’s decision to recategorize the private residence from an RSL to another type of non-registered private residence under Rule 3110(f)(2)(A), how should the member firm answer the RSL Question for this location by the December 26, 2024 reporting deadline?

A15.8: If the associated person’s location is no longer designated as an RSL by the member firm as of December 26, 2024, but the member firm has determined that such location is a non-registered (i.e., non-branch) private residence under Rule 3110(f)(2)(A), then the member firm must still answer the RSL Question by providing a “No” response. In addition, the member firm must maintain that location’s RSL information in the firm’s internal records.

RSL Identification – Scenarios

Q15.9: How should a member firm that is not registered with the NYSE complete the Office of Employment (OEA) section(s) on Form U4 to respond to the RSL Question where an RSL location is not required to be registered in the jurisdiction in which it is located?

A15.9: Under these circumstances, the member firm should take the following steps when completing or updating the Form U4 to accurately report the RSL: 

  • Create an OEA entry for the non-registered location in Form U4’s Section 1, and if applicable, in Section 6 (Registration Requests with Affiliated Firms); 
  • Respond to the Private Residence Check Box to affirmatively denote that the location is a private residence; 
  • When the firm selects “Yes” to the Private Residence Check Box, the RSL Question will be active to allow the member firm to provide a response; and 
  • Once the RSL Question is active, the member firm must respond “Yes” to the question.

Q15.10: How should a member firm complete the Office of Employment (OEA) section(s) on Form U4 where the member firm has determined that an associated person’s private residence is not an RSL, but is instead a registered location for FINRA and in an applicable jurisdiction (and for the NYSE, if applicable)?

A15.10: The member firm should add a new registered office location OEA entry in Section 1 (and if applicable, in Section 6) in the usual manner. The RSL Question will not appear because the location is registered for FINRA and in the applicable jurisdiction (and for the NYSE, if applicable) and therefore cannot be designated as an RSL. See Q15.4/A15.4.

Q15.11: How should a firm complete the Office of Employment (OEA) section(s) on Form U4 and respond to the RSL Question where an associated person’s private residence is both an RSL (i.e., non-branch) location and a registered location (because the location is in a jurisdiction that does not accept RSL)? Updated

A15.11: When the same OEA of an associated person must be reported as both a registered and a non-registered location, the firm should take the following steps when completing or updating Form U4 to accurately report the RSL. Two OEA entries must be created in Form U4’s Section 1 (and if applicable, in Section 6) for the same OEA:

  • OEA Entry #1 as a “Registered” Location:
    • Add a registered office location (a Form BR must have been already filed for this location with the Private Residence Check Box selected) 

      Note: The RSL Question will not appear for this OEA entry because the member firm has identified the location as a registered office through Form BR. 
       
  • OEA Entry #2 as a “Non-Registered” Location:
    • Create a non-registered location;
    • Respond to the Private Residence Check Box to affirmatively denote that the location is a private residence;
    • When the firm selects “Yes” to the Private Residence Check Box, the RSL Question will be active to allow the member firm to provide a response; and
    • Once the RSL Question is active, the member firm must respond “Yes” to the question.

Q16: May a firm use Web Electronic File Transfer (WebEFT) or the FINRA APIs to identify its eligible private residences as RSLs? Updated

A16: A firm may use the FINRA APIs to identify RSLs within individual Form U4s. A firm will not be able to identify eligible private residences as RSLs on Form U4 through WebEFT. For specific technical implementation details related to WebEFT and FINRA API, see https://www.finra.org/webeft and https://developer.finra.org.

Display of Address of Private Residence on BrokerCheck

Q17.1: Will the addresses of RSLs be displayed on BrokerCheck?

A17.1: No. An RSL is an unregistered location and BrokerCheck generally does not display address information for an unregistered office (i.e., non-registered location or non-branch location).

Q17.2: Will the addresses of private residential branch offices be displayed on BrokerCheck?

A17.2: In response to privacy and safety concerns expressed by firms and associated persons, FINRA amended Rule 8312 (FINRA BrokerCheck Disclosure) to exclude generally from display on BrokerCheck the street address of a private residence that is registered as a branch office; provided that a firm has selected the “Private Residence Check Box” on the location’s Form BR (except where the private residence is the firm’s main office as identified on Form BD (Uniform Application for Broker-Dealer Registration). See Securities Exchange Act Release No. 100458 (July 2, 2024), 89 FR 56462 (July 9, 2024) (Notice of Filing and Immediate Effectiveness of File No. SR-FINRA-2024-010). For the purposes of this amendment, a street address consists of the house number (or apartment or unit number, as applicable), street name, and for U.S. locations, the postal code. Therefore, when the “Private Residence Check Box” on Form BR is selected, BrokerCheck generally would release only the city and state, and for such a location outside the United States, the city and country. This amendment was implemented on June 28, 2024. Therefore, firms should ensure that the “Private Residence Check Box” is selected on Form BRs relating to private residential branch office locations that were established before June 28, 2024.

Meaning of “Regularly Conducts” Under FINRA Rule 3110(f)(2)

Q18: Rule 3110(f)(2)(A) provides, in part, that a “branch office” is a location at which an associated person “regularly conducts the business of effecting transactions in, or inducing or attempting to induce the purchase or sale of any security, or is held out as such.” Is there a particular threshold for determining “regularly” under the rule?

A18: The term “regularly conducts” in Rule 3110(f)(2)(A) historically has not been a defined term under the uniform branch office definition. As such, there is no defined threshold level of “regular” that would make a location a “branch office” under Rule 3110(f)(2)(A).

Office Classification for Hybrid Work Arrangements

Q19: In addition to the RSL, what other types of non-branch locations may apply to a hybrid work arrangement?

A19: Rule 3110(f)(2)(A) sets forth several locations that are excluded from the “branch office” definition. These locations, if they meet specified conditions, are viewed as non-branch locations because they are “unregistered” offices (i.e., non-registered locations). These non-branch locations include, among others, a “non-sales” or “back office” location (Rule 3110(f)(2)(A)(i)); a “primary residence” (Rule 3110(f)(2)(A)(ii)); and a location other than a primary residence (i.e., “non-primary residence”) (Rule 3110(f)(2)(A)(iii)).

Q20: My firm is contemplating allowing its information technology (IT) personnel who are registered persons of the firm to work from home on a regular basis. Could their homes be considered non-branch locations?

A20:  If such locations meet the “branch office” definition under Rule 3110(f)(2), the firm may consider whether the homes of the firm’s IT employees qualify for one of the exclusions from the definition. For example, the home of a registered IT employee may be considered a “non-sales” location under Rule 3110(f)(2)(A)(i) or a “primary residence” location under Rule 3110(f)(2)(A)(ii) if the home meets the specified conditions, provided no other activities at such location would require branch office registration. If the IT employee is engaged in supervisory activities, the firm may also consider if the location is eligible for the RSL designation. As a non-registered location, the IT employee’s home address would need to be listed as an OEA on Form U4.

Q21: May a Compliance Officer’s private residence be designated as an RSL?

A21: In general, the role of a Compliance Officer (CO) is usually advisory. Where the firm has assigned supervisory responsibilities to the CO, the CO’s location may be designated as an RSL in accordance with Rule 3110.19 because that designation applies to an associated person who conducts supervisory activities from their person’s private residence. See generally Regulatory Notice 22-10. Also, there are other existing branch office exclusions under Rule 3110(f)(2)(A) such as the “primary residence exclusion” in Rule 3110(f)(2)(A)(ii) that may be relevant to the analysis as to whether a CO’s home could be classified as a non-branch location.

Q22: My firm currently has an associated person who works from a “non-primary residence” (i.e., a vacation or second home). May that residence, if otherwise eligible, be designated as an RSL if it is used for sales activities for more than 30 business days in a calendar year?

A22: No. FINRA reminds firms that the RSL designation is for associated persons who conduct supervisory activities. One of the conditions for RSL designation is that any sales activity that occurs at an RSL must comply with the conditions set forth under Rule 3110(f)(2)(A)(iii), which include that a non-primary residence be used for securities business for less than 30 business days in any one calendar year. If securities-related activities occurring from the RSL exceed 30 business days in any one calendar year, then that residence can no longer be deemed an RSL. Consequently, that location must be registered as a branch office within 30 days after the effective date of the change in office classification.

RSL Conditions / Recordkeeping

Q23: What kinds of records must a firm maintain to demonstrate compliance with the requirement that a “non-primary residence” be used for securities business for less than 30 business days in any one calendar year?

A23: A member firm is expected to maintain records adequate to demonstrate compliance with the “business day” limitation, including at a minimum, documentation identifying any such locations, the number of “business days” spent at such locations, and the activities of the associated person conducted from such location. Note that under Rule 3110(f)(2)(C), a “business day” does not include any partial business day provided that the associated person spends at least four hours on such business day at the associated person’s designated branch office during the hours that such office is normally open for business.

Q24: One condition for RSL eligibility is that required records may not be physically or electronically maintained and preserved at the RSL. Does this condition mean that copies of such records cannot be housed at an RSL?

A24: No. The condition under Rule 3110.19(a)(9) applies to original or “gold source” records that a firm is required to maintain and preserve under applicable securities laws and regulations, FINRA rules and the firm’s own written supervisory procedures. Such original or “gold source” records cannot be physically or electronically maintained and preserved at any location designated as an RSL.

RSL Location Ineligibility Criteria / Supervisor with Less Than One Year of Direct Supervisory Experience

Q25: Is the RSL designation available only to an individual who holds a principal license?

A25: No. The RSL designation is available for the private residence of any appropriately registered associated person of the firm who has been assigned supervisory responsibilities by the firm, provided such location meets the terms of Rule 3110.19.

Q26: Is it enough for an individual to just hold a principal license for over a year to satisfy the eligibility criteria under Rule 3110.19(c)(1)?

A26: No. An individual must have actual direct supervisory experience with their firm (or an affiliate or subsidiary of their firm) for a minimum of one year.

Q27: When can my firm designate an RSL for an individual who will not satisfy the one-year threshold for direct supervisory experience until August 1, 2024? Will the firm be required to register that private residence as branch office until the one-year threshold is satisfied and the location otherwise satisfies the conditions of the rule?

A27: Until the associated person has one-year direct supervisory experience with the firm, the firm cannot designate the associated person’s private residence as an RSL. If the associated person works from their private residence during this period and the location meets the definition of a branch office and does not qualify for any of the exclusions from the definition as set forth in Rule 3110(f)(2), then the private residence will need to be registered as a branch office, and identified as an OSJ, as applicable, until such time as it may become eligible for the RSL designation.

Q28: Must an associated person work as a supervisor for one consecutive year for the RSL designation? For example, what if a firm has an associated person who has a principal’s license, held a supervisory role for three months, then moved into a non-supervisory role for a period of time, and now plans to transition back to a supervisory role. Can the three months of supervisory experience count towards the one-year threshold?

A28: Yes. The one-year direct supervisory experience at the firm (or its affiliate or subsidiary that is also registered as a broker-dealer or investment adviser) does not necessarily have to accrue over a continuous one-year period. However, a firm should consider the duration of an associated person’s time away from direct supervisory responsibilities at the firm as part of its risk assessment.

Supervision of Other Branch Offices from an RSL

Q29: May an appropriately registered supervisor who works from an RSL supervise the activities of associated persons at one or more other branch offices of the firm?

A29: Yes. Rule 3110.19(a) applies to associated persons of a firm and covers an eligible location that is the associated person’s private residence where supervisory activities are conducted. Per Rule 3110.19(a)(6), such supervisor must also be assigned to a designated branch office. Note that Form U4’s “Supervised From” location for the associated persons such supervisor is supervising must be the assigned registered office and not the RSL of the supervisor.

Q30: Can an appropriately registered supervisor who works from an RSL be deemed the “on-site” principal under Rule 3110(a)(4) and Rule 3110.03 for one or more OSJs?

A30: Yes. The supervisor at the RSL can be deemed to be the “on-site” principal at one or more OSJs provided that such supervisor complies with the requirements of Rule 3110.03, which, among other things, requires the on-site principal to have a physical presence, on a regular and routine basis at each OSJ for which the principal is assigned supervisory responsibilities. All offices or locations from which such supervisor “regularly” works must be listed on the individual’s Form U4.

Membership Application Program (MAP) / “Material Change in Business Operations”

Q31: My firm estimates that the number of OSJs, branch offices, and non-branch locations (e.g., RSLs, primary residences, back office/non-sales locations) it is planning to designate, will result in an increase in the total number of firm offices (registered and unregistered) that will be above the office count specified in the firm’s membership agreement and the thresholds set forth in IM-1011-1 (Safe Harbor for Business Expansions) (“Safe Harbor”). The firm will comply with the definitions of OSJ and branch office, including the exclusions, and the conditions of Rule 3110.19 in establishing RSLs. Other than providing a “second seat” to associated persons at eligible locations, the firm will not be undergoing any other changes in business operations. The firm does not have any written restrictions on the number of offices (registered and unregistered) it is permitted to have under the firm’s Membership Agreement. Because the office count (registered and unregistered) will exceed the Safe Harbor, would the firm need to file a Continuing Membership Application (CMA) under paragraph (a)(5) of Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations) seeking FINRA’s approval of the increased office count?

A31: The firm must determine if the change is material in accordance with Rule 1017. For example, where the firm is only adding “second seats” for its associated persons at eligible locations, the firm should review the relevant facts and circumstances, including the degree to which the firm’s existing supervisory and compliance systems can accommodate a more dispersed workforce, and should determine whether the contemplated increase in the number of offices (both registered and unregistered) will be a “material change in business operations” for the firm such that it would trigger the need to file a CMA. Based on a reasonable review, a firm may be able to conclude that the contemplated increase is not material. As part of the firm’s own “materiality” determination for purposes of compliance with Rule 1017, the firm must document its determination and the factors it reasonably considered in making such determination, including, at a minimum:

  • The counts by office type—OSJ, non-OSJ branch office and non-branch location, specifying the RSLs established in accordance with Rule 3110.19 and the other non-branch locations under Rule 3110(f)(2)(A); and
  • The relevant facts and circumstances the firm considered in determining the increased office count is not a “material change in business operations.”

It may be worthwhile for the firm to review note that Notice to Members 00-73, discusses, facts and circumstances to consider when a firm assesses the materiality of a change.

Q32: If the estimated number of RSLs that a firm plans to designate will increase its office count considerably, and the Safe Harbor is not available to the firm because it has a “disciplinary history” as defined in the Safe Harbor provision, would the firm need to file a CMA under Rule 1017(a)(5) seeking FINRA’s approval of the increased office count?

A32: If a change falls outside the specified terms of the Safe Harbor, the firm would need to determine if the proposed change is material under Rule 1017 (see generally Notice to Members 00-73) and would require a CMA. As explained in Q31/A31, if the firm is only adding “second seats” for its associated persons at eligible locations and, based on the firm’s review of the relevant facts and circumstances, including the degree to which the firm’s existing supervisory and compliance systems can accommodate a more dispersed workforce, then the firm may be able, based upon a reasonable review of the relevant facts and circumstances, to determine that the contemplated increase in the number of offices may not be a “material change in business operations” that would trigger the need to file a CMA. As part of the firm’s own “materiality” determination for purposes of compliance with Rule 1017, the firm’s determination must include, at a minimum, the information set forth in Q31/A31. The firm should document its determination and the factors it considered.

Q33: Under the fact patterns presented in the questions above, would the firm need to submit a request for a materiality consultation with FINRA?

A33: Under the facts presented, a firm generally would not need to submit a request for a materiality consultation with FINRA, which is a way for a firm to seek input from FINRA in determining whether a contemplated change that does not fit squarely within Rule 1017 may necessitate the submission of a CMA. A materiality consultation with FINRA is voluntary.

Q34: Does a firm need to submit a request for a materiality consultation if the Safe Harbor is available to the firm and the increase in the number of offices (registered and unregistered) is within Safe Harbor thresholds?

A34: Assuming there are no other material changes that would require a CMA under Rule 1017, if the Safe Harbor is available to the firm, and, the firm’s addition of offices (registered and unregistered) falls within permissible thresholds of the Safe Harbor provisions, the increase is presumed not to be a “material change in business operations” for purposes of Rule 1017, and a materiality consultation is not required.

Q35: Is a firm required to submit a CMA if the firm’s membership agreement has a written restriction regarding the number of offices (registered and unregistered) it is permitted to operate, and the firm expects to exceed that number?

A35: Yes. A firm that seeks to modify or remove a membership agreement restriction must submit a CMA under Rule 1017(a)(5).

Q36: My firm has determined that the increases in its number of offices (registered and unregistered) will not be material. If the firm informs FINRA of the updated office count, will FINRA simply update the firm’s membership agreement to reflect the current office count?

A36: No. A membership agreement typically specifies the number of offices a firm has at the time of the approval of the application. Such number is used as the benchmark to measure business expansions, including permissible expansions under the Safe Harbor. The office count referenced in a firm’s membership agreement does not need to be updated if the business expansion is not material. FINRA will not unilaterally update a firm’s office count referenced in the membership agreement based on the firm’s current office count or prospective office count. Any firm that relies on the Safe Harbor must maintain records of how it stayed within the Safe Harbor guidelines. 

Enhancements to Form BR Functionality

FINRA Alerts and Updates

Q37: What did the Alert issued on June 18, 2024 provide? Updated

A37: See Q38/A38.

Q38: What enhancements to Form BR functionality have occurred since the Alert was issued on June 18, 2024? Updated

A38: To date, FINRA implemented Form BR functionality enhancements related to initial and amendment Form BR filings to account for RSL designations of new locations for FINRA, the NYSE, and for jurisdictions, as applicable, that have either accepted the RSL designation or not (see July 18, 2024 Alert and October 7, 2024 Alert).

Additional guidance with respect to the enhancements to Form BR functionality for initial and amendment Form BR filings is provided below. See also SRO/Jurisdiction Fee and Setting Schedule – Web CRD that includes an “Accepts RSL” column that lists the jurisdictions and the NYSE to indicate the regulators that have accepted the RSL designation.

Accounting for the RSL Designation Through Form BR – Initial and Amendment

Note: FAQs 39-44 have been updated to account for the functionality enhancements for both initial and amendment Form BR filings. Here is a chart that provides an overview of the various scenarios covering Form BR filings for FINRA, the NYSE, and a jurisdiction, as applicable. See also SRO/Jurisdiction Fee and Setting Schedule – Web CRD.

Q39: How should a firm complete an initial Form BR or amend Form BR for a location that is an RSL for FINRA and the NYSE, but located in a jurisdiction that has not accepted the RSL designation? Updated

A39: The firm should create a new (or initial) Form BR filing or amend Form BR, as applicable, identifying the location as a private residence by marking the Private Residence Check Box. Once the Private Residence Check Box is marked in the initial Form BR or amendment Form BR filing, as applicable, the firm will be led to Section 2.A. to “Register/Notice File Branch Office with SRO/Jurisdiction.” Once in Section 2.A. of Form BR, the firm should de-select FINRA and the NYSE. The applicable jurisdiction will be pre-selected in Form BR so the firm should retain the pre-selection.

Q40: How should a firm complete an initial Form BR or amend Form BR for a location that is an RSL for FINRA and the NYSE, and a jurisdiction that has accepted the RSL designation? Updated

A40: The firm does not need to create a new (or initial) Form BR filing or amend Form BR. The firm may close the branch office by submitting a Form BR Closing.

Q41: Reserved

Q42: How should a firm complete an initial Form BR or amend Form BR for a location that is an RSL for FINRA and the NYSE, but located in a jurisdiction that does not require registration or “notice filing” of branch offices (non-branch participating jurisdiction)? Updated

A42: The firm does not need to create a new (or initial) Form BR filing or amend Form BR. The firm may close the branch office by submitting a Form BR Closing.

Q43: How should a firm file an initial Form BR or amend Form BR for a location that is an RSL for FINRA and the NYSE, but needs to be registered or “notice filed” as a branch office with a jurisdiction, using the Web EFT application? Updated

A43: Form BR functionality has been enhanced so that firms can de-select FINRA and the NYSE when establishing a new location or amending an existing location that the firm designates as an RSL, but still needs to be registered or “notice filed” with a jurisdiction as a branch office. Setting the “BranchRegulatorFINRA” tag or “<BranchRegulatorNYSE>”, or the “BranchRegulatorJuris” tag to “true” (select) or “false” (de-select), as applicable, will now be an option for firms using WebEFT. There are no changes to the Form BR schema; however, the following tags must be included, as applicable, in the Form BR xml if such location is an RSL non-branch location and not a FINRA or NYSE registered branch office.

<Section2Registration> 
<BranchRegulatorFINRA>false</BranchRegulatorFINRA>*if the location is a FINRA RSL
<BranchRegulatorNYSE>false</BranchRegulatorNYSE>*if the location is an NYSE RSL
<BranchRegulatorJuris>true</BranchRegulatorJuris>*if the jurisdiction does not accept RSL

* If the jurisdiction accepts RSL and the branch office is not required to be registered or “notice filed” with the jurisdiction, the firm does not need to create a new (or initial) Form BR filing or amend Form BR, as applicable. The firm may close the branch office by submitting a Form BR Closing via WebEFT.

Q43.1: Reserved

Q44: If a firm filed its initial Form BR for an office that was registered or “notice filed” as a branch office only with a jurisdiction (i.e., FINRA and the NYSE, if applicable, were de-selected on the initial filing) then later needs to amend Form BR for a reason unrelated to the RSL designation, what does the firm need to be aware of when it amends Form BR? Updated

A44: A firm may amend Form BR in the usual manner. The registration or “notice filed” choices made on prior filings will be retained. For example, if FINRA and the NYSE were de-selected on the prior filing they will remain de-selected in a subsequent amendment Form BR filing.

Q45: Reserved

Q46: Reserved