Crafting Effective WSPs for Remote Locations

The start of the COVID pandemic changed how people work around the world. Many began working remotely and used social media to communicate with clients, supervisors, and operations staff. Operating from a remote location can provide challenges to securities industry participants, including regulatory expectations that Written Supervisory Procedures (WSPs) to be present and address Operations and Supervision of these locations.

Residential Supervisory Locations

If your broker-dealer has associated persons involved in supervisory activities conducted from a primary residence, that residence would be considered a “supervisory branch location.” As such, the residence would be subject to branch registration and annual inspections, unless that location is deemed to be a Residential Supervisory Location.

A Residential Supervisory Location (RSL) is a type of non-branch location that would not be subject to annual inspections but would be required to be inspected no less frequently than once every three years. In order to be considered a RSL, certain criteria would need to be met. The firm also must meet certain qualifications in order to designate any location as a RSL.

In addition to each location meeting the criteria above, the firm must also conduct and document a risk assessment for the associated person assigned to that office or location. 

Remote Location Written Supervisory Procedures (WSPs)

Whether working from a Residential Supervisory Location (RSL) or other remote location, Written Supervisory Procedures should include but not be limited to:

Eligibility and disqualification standards

• Individuals subject to heightened supervision or restricted registrations imposed by a regulator or firm should not be eligible.
• Individuals with numerous or recent client complaints and/or regulatory actions should be individually reviewed for remote work eligibility.
• Circumstances that would cease an individual’s ability to continue working remotely.

Technology Requirements for Remote Operations

• Firms should determine that both the home and remote location have the technology in place to communicate, execute transactions and provide ability to supervise activity remotely. In instances of Remote Supervisory Locations, the firm may wish to conduct an on-site review prior to approval.
• Individual computers should be password encoded, requiring frequent change and possible dual authentication.
• Desktop/laptop computers should be camera capable.
• Enhanced, frequent training and testing should be provided on cybersecurity issues.

Security Measures for Remote Locations

• Offices at remote locations should be located in rooms which have a lock capable door and limited/no access by non-firm individuals.
• Firms may wish to consider security systems.
• A “clean desk” policy
• No client-related mail should be received in streetside mailboxes. Firms should determine if P.O Boxes will be considered.
• Client visits should not be permitted at remote locations.

Effective Remote Supervision Strategies

Firms must be able to provide effective supervision for remote work using online video tools (e.g., Zoom), reviewing client account opening documents, keeping track of supervisory reports, and quickly checking things like client asset movements. Operations and sales practice issues should also be addressed as timely as they would be in an office location.

• Outside Business Activities and Selling Away. Issues like Outside Business Activities and Selling Away, which can happen more often at locations without a manager or supervisor, should be discussed with staff, and require extra training, reporting, and monitoring.
• Onsite Reviews. On-site reviews should be conducted randomly.
• Business Continuity Plan details and testing should address the operations of remote locations during business disruptions.
• Residential Supervisory Locations Rule (RSL Rule). The RSL Rule is a Financial Industry Regulatory Authority (FINRA) rule designated for use by member firms. Branch office locations may also be required to register at the state level. Firms should check with each state in which they have supervisory branch offices or locations to determine if the state recognizes the FINRA RSL Rule. Firms can reference FINRA’s SRO/Jurisdiction Fee and Setting Schedule – Web CRD to determine the states which recognize the FINRA RSL Rule, do not recognize the rule, or do not register branch offices. Firms should use the matrix as a reference, but check directly with each state prior to determining a path of action.

Tailored Compliance Solutions for Remote Supervision

Permitting both registered and non-registered individuals to work from remote locations poses numerous challenges to a firm. However, permitting disciplined individuals combined with effective written procedures and supervision can provide an effective environment for servicing client accounts, while ensuring compliance with firm and regulatory requirements.

With the proliferation of individuals operating from remote locations, there is no time like the present to have Oyster Consulting review your current Written Supervisory Procedures or develop your initial WSPs governing these activities. Don’t wait until sales practice or operational issues arise.  Oyster Consulting’s regulatory compliance consultants have the expertise your firm needs to craft effective Written Supervisory Procedures for your firm’s remote workers and Remote Supervisory Locations, including Business Continuity Plans and testing.