The SIA has expressed serious concerns over proposed changes by the NYSE and SEC that would alter the qualifications by which a broker/dealer office is considered a branch office.
Currently, a primary residence is not considered a branch office. But under the new definitions proposed by the NYSE, a primary residence could be declared a branch office if it were used more than 50 business days a year—that is, if a broker works at home once a week.
The SIA, the industry’s trade group, argues against the proposed changes, saying the activities that take place in an office should define what constitutes a branch office—not how much time is spent there. In its comment letter, the SIA said offices in residences do not handle securities and funds on the premises, are not subject to oversight and generally do not hold their residence "out to the public as an office for the purpose of conducting a securities business."
The SIA also contends that myriad questions and scenarios regarding the 50-day qualification would result from the change, such as how to resolve the questions of maternity leave or reps in semi-retirement. The change could also tax firm resources, according to the SIA. Firms would have to monitor where work was performed and for how long.
In response, rather than tracking the work habits of its employees the SIA believe firms will choose to register every broker’s residence as a branch office. The resulting cost of conducting required annual branch office inspections would be "significant, with little obvious benefit to consumers or regulators," says the letter.
In a November notice of the proposal the NYSE stated that the rule change was intended to address several issues involving "establishment, maintenance, and testing of internal controls as well as several supervisory issues."
Kimberly Chamberlain, author of the letter, urged the SEC and the NYSE not to require registration of primary residences "in all but the most limited of circumstances."
