On January 29, 2025, we hosted a webinar focused on Residential Supervisory Locations (RSLs) and the FINRA Remote Inspection Pilot Program. With new FINRA rules (3110.18 & 3110.19) reshaping how firms approach supervisory oversight, our expert panel broke down the most pressing compliance considerations.
We were joined by industry leaders who shared practical strategies for designing an effective RSL compliance program. They covered regulatory expectations, technology solutions, risk-based oversight, and best practices to ensure firms stay ahead of compliance challenges in 2025 and beyond.
If you missed the live session, we’ve distilled takeaways to help your firm navigate the evolving compliance landscape.
- Understanding Residential Supervisory Locations (RSLs)
FINRA’s new rules allow certain supervisory functions to be conducted from private residences designated as RSLs. However, this is not a blanket approval for all home-based supervisors—there are strict eligibility requirements that firms must meet. This change reflects FINRA’s recognition of modern remote work trends, offering firms flexibility while ensuring investor protection remains a priority.
- Eligibility Criteria for RSLs: Not Everyone Qualifies
To qualify as an RSL, both the firm and the individual supervisor must meet specific requirements. Firms that have a significant disciplinary history, regulatory restrictions, or heightened supervision requirements are disqualified. For example, individuals must have at least one year of direct supervisory experience and cannot be under mandatory heightened supervision or active regulatory investigation. Understanding these restrictions is crucial for avoiding compliance missteps.
- Supervisory Activities Permitted at RSLs
Not all supervisory activities can be performed at an RSL. Final approval of new accounts, transaction endorsements, and final approval of retail communications (except research reports) are prohibited. This ensures that higher-risk oversight functions remain within traditional office settings, reinforcing accountability while allowing flexibility in certain supervisory roles.
- Inspection Requirements for RSLs: Not an Annual Obligation
Unlike Office of Supervisory Jurisdictions (OSJs), which require annual inspections, RSLs must be inspected on a regular periodic basis—typically every three years. These inspections must be conducted in person, unless the firm is enrolled in FINRA’s Remote Inspection Pilot Program. Firms must carefully plan their inspection schedules to remain compliant.
- Not All States Recognize RSLs
Compliance isn’t just about FINRA rules—state regulations matter too. Some states do not recognize RSL designations, meaning firms must register these locations as branches and conduct annual inspections. Before designating any home office as an RSL, firms must check state-specific requirements to avoid regulatory conflicts.
- Risks of Non-Compliance with RSL Regulations
Misclassifying locations as RSLs, failing to meet eligibility criteria, or neglecting inspection obligations can result in regulatory sanctions, fines, and reputational damage. Firms must document their RSL decisions thoroughly and be prepared to justify them during FINRA audits. A poorly managed RSL program could also lead to forced reclassification of home offices as branch locations, increasing compliance costs.
- The FINRA Remote Inspection Pilot Program
FINRA’s three-year Remote Inspection Pilot Program offers firms an alternative to in-person inspections, reducing operational costs and improving efficiency. However, participation requires firms to demonstrate a robust risk-based approach. Those who opt in must maintain detailed records of supervisory activities and technological safeguards to ensure compliance.
- Leveraging Technology for RSL Compliance
Successful RSL oversight relies on technology-driven solutions for record-keeping, workflow automation, and risk assessment. Certain platforms allow firms to securely store compliance records, track supervision activities, and automate document approvals. These tools minimize human error and regulatory risk, making remote supervision more efficient.
- Implementing a Risk-Based Oversight Model
FINRA expects firms to customize their RSL compliance approach based on risk assessments. Factors like prior compliance history, volume of customer complaints, and involvement in high-risk transactions must be considered. Firms should develop structured oversight models, including automated red-flag alerts, periodic attestations, and proactive audits, to ensure continued compliance.
- Updating Written Supervisory Procedures (WSPs) for RSLs
A properly designed RSL program requires comprehensive updates to WSPs. Firms must outline, to name a few:
- Who qualifies for RSL designation
- How periodic inspections will be conducted
- The role of technology in monitoring RSLs
- How RSL compliance will be tested and documented
FINRA examiners will expect to see redlined WSP updates detailing these changes, so firms should ensure all modifications are clearly documented.
- U4 Reporting Obligations for RSLs
Each RSL must be recorded in FINRA’s CRD system by updating Form U4. This ensures regulators have a clear record of which locations are designated as RSLs. Firms that fail to update U4 filings accurately risk regulatory scrutiny and potential fines.
- Using Attestations to Strengthen Compliance
Quarterly attestations from supervisors and financial professionals provide ongoing oversight for RSLs. These attestations require employees to confirm compliance with key policies, such as:
- Timely submission of client documents
- Adherence to marketing approval processes
- Proper handling of customer funds and transactions
By implementing structured attestation processes, firms can demonstrate strong internal controls to regulators.
- Hybrid Work Arrangements & RSL Classification
Hybrid work models no longer provide a compliance loophole. If a supervisor performs any supervisory functions from home, even part-time, their residence may require RSL classification. Firms must carefully evaluate work arrangements to determine whether RSL designation is necessary.
- The Role of Third-Party Compliance Providers
Many firms are turning to third-party compliance solutions to handle RSL audits, regulatory filings, and supervisory oversight. Outsourcing certain compliance functions can help firms:
- Reduce administrative burdens
- Ensure regulatory expertise
- Maintain operational efficiency
Engaging trusted compliance partners can help firms navigate complex RSL requirements more effectively.
- The Future of Remote Supervision & Compliance Trends
FINRA will evaluate industry feedback over the next three years before implementing a permanent remote inspection rule. Firms that proactively adapt to RSL requirements, invest in compliance technology, and stay informed about regulatory changes will be best positioned for long-term success. Staying engaged with FINRA updates and industry best practices is critical to avoiding compliance pitfalls.
Stay Ahead of Compliance Changes
Firms must take proactive steps to stay compliant with RSL and remote inspection regulations. By implementing a well-structured RSL program, leveraging technology-driven solutions, and maintaining clear documentation, firms can adapt to these changes while ensuring robust supervisory oversight.
To get all the takeaways and insights, you can watch our full webinar on demand HERE.
FINRA FAQs for Further Reading:
- Residential Supervisory Locations: FINRA RSL FAQs
- Remote Inspection Pilot Program: FINRA Remote Inspections FAQs
