The US Securities and Exchange Commission and the Financial Industry Regulatory Authority recognize the significant impact of the coronavirus (COVID-19) pandemic on broker-dealers, investors, and other stakeholders, and have provided important guidance and relief to broker-dealers on how to meet some of these challenges.
This LawFlash addresses guidance issued prior to 5:00 pm on March 24. We will update this LawFlash to address relief and guidance published later on March 24 and in the days to come as additional relief and guidance is published.
Both the Financial Industry Regulatory Authority (FINRA) and the US Securities and Exchange Commission (SEC) are operating entirely remotely, but for “essential personnel.” Based on our direct experience to date, both organizations remain extremely responsive to email and telephone communications, including inquiries regarding COVID-19-related guidance and relief and also currently active matters (exams, membership applications, etc.).
FINRA has, however, adjusted its operational focus in recognition of the significant adjustments firms are making to comply with governmental restrictions on travel or to otherwise move staff to remote work in order to protect their health and safety. For example, FINRA will
The SEC’s Office of Compliance Inspections and Examinations (OCIE) has also shifted focus. For example, OCIE will
FINRA issued Regulatory Notice 20-08 (RN 20-08) on March 9, 2020, to encourage broker-dealers to review their BCPs for preparedness for pandemic-related disruptions (such as absenteeism, teleworking, travel limitations, and technological problems) and to provide relief from certain regulatory obligations, as described further below. Among other things, FINRA encourages firms to prepare for pandemic-related disruptions by
To date, FINRA has provided the COVID-19-related regulatory relief and additional guidance to firms as set forth below, through RN 20-08, published Frequently Asked Questions (FAQs), and otherwise on its COVID-19 web resource (FINRA COVID-19 Resource). FINRA continues to work on additional relief and guidance in coordination with other regulators and is expected to provide additional relief and guidance as the nature and impact of the COVID-19 pandemic evolves. Current relief and guidance includes the following:
Emergency Office Relocations
Regulatory Filings and Responses to FINRA Inquiries, Matters, and Investigations
Qualification Exams and Continuing Education
Like FINRA, the SEC and its staff have been working diligently to provide COVID-19-related relief from certain broker-dealer regulatory obligations.
Consolidated Audit Trail (CAT)
Rule 17f-2 Fingerprinting
The Co-Directors of the SEC’s Division of Enforcement have also emphasized in a public statement the importance of maintaining market integrity and following corporate controls and procedures. For example, they noted that, given the unique circumstances COVID-19 is presenting:
FINRA has previously provided guidance in connection with pandemics and other significant broad-based business disruptions, and has observed the following as key points firms might also consider:
In response to Hurricane Katrina and the 2007 California wildfires, FINRA also noted the following, although FINRA has not yet provided similar guidance since the COVID-19 pandemic began:
Federal guidelines have been issued and a growing list of states and local governments have imposed restrictions that seek to limit movement and gathering of people in an effort to slow the spread of COVID-19. We are following these developments on a state-by-state basis as they change daily and, in some cases, hourly. For more detailed information, and jurisdiction-by-jurisdiction analysis, please consult our Coronavirus COVID-19 resource page for contacts on our Financial Services COVID-19 Task Force.
For our clients, we have launched a resource page to help keep you on top of developments as they unfold. Please check this resource page for additional information and the latest updates on the SEC’s response to COVID-19, as well as guidance from our lawyers relating to employment matters, data privacy concerns, supply chain disruption, immigration status requirements, remote work opportunities and challenges, and ongoing federal and state updates.
 While this LawFlash discusses actions taken that address broker-dealers’ concerns specifically, Morgan Lewis has published LawFlashes regarding all regulatory action and will continue to do so. Please see our Coronavirus COVID-19 resource page for our LawFlashes addressing SEC, CFTC, and other relief. The resource page will be updated as additional regulatory actions are taken.
 For any pending requests relating to an ongoing routine cycle examination, FINRA advises firms to contact the assigned FINRA exam staff for guidance.
 We note that cellular telephone numbers should be acceptable contact telephone numbers, but firms may want to consider requesting landline telephone numbers from their personnel, to the extent available, in the unlikely event that the cellular system were to become overwhelmed or fail for a period of time, which has happened in the past.
 Rule 17a-5(d)(5) under the Exchange Act requires members to submit their annual reports to FINRA no later than 60 calendar days after the date of the member’s fiscal year end. The procedures set forth under Interpretation /01 under Rule 17a-5(m)(1) are waived for purposes of this extension.
 Every member is required to file a Financial and Operational Combined Uniform Single (FOCUS) Report as specified under Rule 17a-5 under the Exchange Act. Rule 17a-5(a) requires members to submit their FOCUS Reports no later than 17 business days after month-end. The written application and procedures required pursuant to Rule 17a-5(a)(6) under the Exchange Act, and the related Interpretations, are waived for purposes of this extension.
 “Participants” currently include the BOX Exchange LLC; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange, Inc.; FINRA; Investors Exchange LLC; Long Term Stock Exchange, Inc.; Miami International Securities Exchange LLC; MIAX Emerald, LLC; MIAX PEARL, LLC; Nasdaq BX, Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq PHLX LLC; The Nasdaq Stock Market LLC; New York Stock Exchange LLC; NYSE Arca, Inc.; NYSE American LLC; NYSE Chicago, Inc.; and NYSE National, Inc. The list of “Participants” is subject to change.
 “Industry Members” include any member of a national securities exchange or a member of a national securities association.
 See FINRA Provides Guidance on Pandemic Preparedness, FINRA Regulatory Notice 09-59; Guidance for Members Affected by Hurricane Katrina, NASD Notice to Members 05-57; Guidance for Firms Affected by the California Wildfires, FINRA Regulatory Notice 07-49; Guidance to Members Affected by Hurricane Sandy, FINRA Regulatory Notice 12-45.