Regulatory inspections have long been a cornerstone of FINRA’s oversight model, providing an in-depth examination of firm operations, supervision practices, and potential misconduct. But in a post-pandemic landscape, the self-regulatory organization is exploring new territory, and it’s raising red flags.

Last summer, FINRA launched a three-year Remote Inspections Pilot Program that allows eligible member firms to satisfy their branch inspection obligations without an in-person visit. Instead, firms can conduct inspections remotely by submitting detailed data about their business, including firm size, customer complaint history, product complexity, and the nature of their client base.

The initiative builds on flexibility granted during the pandemic, when FINRA temporarily permitted remote inspections for lower-risk offices. Now, this formalized pilot aims to evaluate whether a hybrid or remote model could be a viable long-term alternative.

However, not everyone is convinced, especially when it comes to protecting investors.

In a sharply worded public letter to FINRA, the Public Investors Advocate Bar Association (PIABA) criticized the program as a step backward. “What FINRA should be doing is adding more robust inspection requirements instead of limiting them,” said PIABA President Adam Gana. He argued that even current in-person audits are often insufficient and that removing them entirely risks enabling misconduct.

What’s the Concern?
PIABA’s primary concern is that remote inspections fundamentally weaken FINRA’s ability to detect issues like:

  • Sales practice violations
  • Unauthorized marketing
  • Off-the-books activity
  • Signs of financial excess or lifestyle red flags

“In-person audits allow compliance personnel to spot the physical clues — documents left on desks, questionable materials pinned to walls, or conversations that raise red flags,” Gana said. “There are simply elements of supervision, culture, and compliance that cannot be adequately assessed through a screen.”

The letter argues that home offices in particular should remain subject to annual, unannounced, in-person audits, and that remote inspections should supplement, not replace, existing protocols.

The debate underscores the ongoing tension between modernization and investor protection. As FINRA continues to experiment with supervision models, PIABA’s challenge serves as a reminder: regulatory innovation must not come at the cost of accountability.

To read the PIABA’s full letter to FINRA, click here.