Chapter 6 - General Supervision Flashcards

1
Q

Items to be reviewed and approved

A

Registered Principals are not required to review confirmations.

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2
Q

Member offices

A

There are three types of offices that a member may open:

  • An office of supervisory jurisdiction - conducts OSJ activities
  • A branch office - identified to the public as being a place where the member conducts business but does not engage in any activities that would require it to be considered an OSJ.
  • A satellite office - usually a smaller office that does not meet the definition of a branch.

Potential test question: Could a Principal be the resident principal for more than one OSJ? Yes, they can if geographically maintain a presence at both locations. FINRA must be notified (not approved).

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3
Q

Reps working from home

A

In the case of a rep from out of state is temporarily working in another state, they have 30 days to report to a branch for supervisory jurisdiction.

Working on a yacht and move marinas, they have 30 days to report to FINRA.

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4
Q

Written Supervisory Procedures

A

Must include an organization chart with names showing supervisory responsibilities.

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5
Q

Failure to supervise

A

A principal can be held responsible for the actions of the agents assigned to the principal.

Only mitigating factor is when a rep takes extraordinary steps to conceal their activity.

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6
Q

Executive Representative & Chief Compliance Officer

A

Both are identified to FINRA.

CCO must be certified by CEO of B/D every year by April 1.

Any changes within the year must be updated to FINRA within 30 days.

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7
Q

Review of Supervisor Control System

A

Annual test and report of supervisory control systems.

Identify the person who will test and evaluate.

The report must be given to senior management and include:

  • Compliance issues
  • We’re systems are working well
  • We are systems can be improved
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8
Q

Business continuity plan

A

The plan must provide:

  • Alternative communication between firm and employees
  • Alternative communication between clients and firm
  • A way for clients to access funds
  • Backup plans for each line of business
  • Backup of data electronically and hardcopy
  • Identity of two firm contacts to FINRA - one must be a principal.
  • Regulatory reporting/back up
  • Alternative physical office for employees
  • Financial and operational assessment back up
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9
Q

Business continuity plan disclosures

A
  • Should be provided to clients at time account is open and annually thereafter
  • Should be posted on the firm’s website
  • Must contain “go out of business” clause
  • If single office firm, contact for clearing firm is required
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10
Q

Heightened supervisory requirements

A
  • Complex structured products
  • Reps who have been sanctioned by FINRA
  • Principles who turn blind eye to violations
  • Producing managers who January 20% or more of office production - daily supervision of all trades

A red flag for producing managers - cancel in one account and re-bills in another.

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11
Q

Tape recording employees

A

They are required to tape-record all employees.

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12
Q

Customer complaints

A
  • Must be properly forwarded to principal
  • Maintain in central file (OSJ)
  • Report electronically to FINRA quarterly within 15 days
  • Theft, forgery - reported immediately to FINRA within 10 business days
  • If the firm received a complaint regarding a terminated rep, the complaint still filed with FINRA - need not be sent to the rep.
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