FINRA withdrew its controversial plan to require brokerages to supervise the outside business ac-tivities of their employees where such activities are unrelated to the securities industry. FINRA had received extensive pushback from the indus-try concerning this requirement. Industry partici-pants contended that such a rule would put an unreasonable and unmanageable burden on bro-kerages to supervise unrelated business activities, such as rental properties, restaurants and a whole host of other outside business activities, in which their employees might be engaged outside of business hours. FINRA’s Rule 2010 still applies, however, to require high commercial standards and just and equitable principles of trade in rela-tion to the non-securities activities of members and their associated persons.
Although FINRA’s proposal no longer includes this controversial provision, FINRA’s proposal still includes extensive new supervisory require-ments for brokerage firms. The proposal ad-dresses issues such as an appropriately registered supervisory principal being required to regularly supervise the activities of an on-site producing principal. In this regard, the presumption would be that a principal would not be assigned to su-pervise more than one office. Attempting to su-pervise more than two offices would likely be deemed unreasonable, and thus be subject to in-creased scrutiny. In attempting to supervise more than one office, proximity of the offices would be highly relevant. FINRA’s proposal also addressed other supervisory related issues, such as the re-porting of internal investigations and the tracking of customer complaints.