Back in the early (and dark) days of the pandemic, we published our April 2020 Bulletin Working From Home Edition. We followed that up with an article in our May 2020 Bulletin titled "May an associate advising representative work remotely or in a one-person branch office?". Although the pandemic may be something we all want to forget, we should not forget the important regulatory issues raised by working from home (WFH) – as many of us continue to do. Indeed, the regulators have not forgotten about these issues.
In recent regulatory audits of registered firms, the regulators have flagged issues regarding home offices. Under the heading of inadequate supervision and training, regulators observed that some individual registrants working from home permit their spouses or other individuals to have unrestricted access to their home offices, including client documents. The regulators noted that National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations requires registrant firms to keep their records in a safe location. This includes ensuring that no one has unauthorized access to information, particularly confidential client information. Where firms have policies and procedures regarding employees working from home and maintaining client confidentiality, the firms must also have evidence that they monitored the WFH arrangements of their registered employees. Where there is no such evidence, the regulators will have concerns about the firm's oversight over the books and records maintained by the individual registrant at their home offices. Of particular concern is the lack of security of confidential materials such as know-your-client forms and other client records, which could lead to breaches of other requirements including a firm's personal trading policy or misuse of material non-public information.
For more detailed regulatory guidance, see the December 2020 Canadian Investment Regulatory Organization (CIRO) publication Business locations — Registration and Compliance approach to work from home arrangements. There, CIRO noted that appropriate recordkeeping would include the following information: the date on which the regular and on-going WFH arrangement started; a description of the activities that occur at the individual's residence; the enhanced supervision assessed and/or introduced in order to address any oversight gaps that may be arising from the WFH arrangement; potential conflicts of interest arising from the WFH arrangement, and how they have been addressed; and the end date of the WFH arrangement, if applicable. In that publication CIRO also provided factors for considering whether a personal residence is a "business location" that must be reported to regulators.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
