Written Supervisory Procedures (WSPs) and Compliance Controls Flashcards
Where must a copy of a firm’s written supervisory procedures (WSPs) be kept?
Onsite at the OSJ - office of supervisory jurisdiction
How long must WSPs be kept?
Must be kept for at least three years after last USE; two years in a readily accessible place (the WSP’s effective date must be noted)
What activities must occur at a OSJ (7 buckets)?
OSCAARS
1) ORDER execution / market making
2) STRUCTURING public or private offerings (IBD)
3) CUSTODY of funds / securities
4) Final APPROVAL of customer accounts
5) Final APPROVAL of retail communications
6) RECEIVE/RESPOND to customer complaints
7) SUPERVISION of branch and non-branch locations
This location serves as the location where functions of supervision for the firm are carried out (i.e., main HQ).
Office of supervisory jurisdiction (OSJ)
True / false: must both original registered principals be housed at the firm’s OSJ?
True
This is any location where one or more associated persons regularly conducts securities business OR that he held out as such
A branch office
This type of branch office has responsibility to for supervising other branch office(s) OR non-branch office(s)
Supervisory branch office
This type of branch office JUST engages in conducting securities business with the public with no outside supervisory responsibilities
non-supervisory branch office
What type of rep is in charge of a non-supervisory branch office?
series 7 rep (to sell securities)
True/false: Each branch office requires a series 24 registered principal onsite
false
This is any location NOT held out to the public as places where customer transactions take place (i.e. “back office”)
A non-branch office
For example:
1) primary residence of a RR (subject to limitations)
2) Back office (e.g., IT)
3) Location of convenience (e.g., restaurants, golf courses)
4) Business continuity location
What are quantitative limits (transactions and days present) to a location to be considered a non-branch office (otherwise will need to register as a branch office)
Less than 25 customer transactions per year
AND
Less than 30 BUSINESS days conducting transactions on behalf of a BD
What is the inspection frequency of a OSJ?
annually
What is the inspection frequency of a SUPERVISORY branch office?
annually
What is the inspection frequency of a non-branch office (including residential supervisory locations (RSLs))?
“Periodic” (practically every 3 years)
What is the inspection frequency a NON-SUPERVISORY branch office?
every 3 years
These processes test and verify that a BD’s WSPs in fact achieve compliance with applicable securities laws and regulations
Supervisory control policies and procedures (SCPs)
How often must senior management receive a report on the status of SCPs?
annually
Who must attend the annual compliance meeting? Can it be coupled with other meetings?
All registered personnel
Yes can be delivered with other business topics, but cannot be opted out of.
For a BD, how many chief compliance officers are required and where is the appointment made?
On what form is the appointment made / amended?
AT LEAST one REGISTERED PRINCIPAL
Appointment is made on schedule A of Form BD, as amended
True or False - A CCO can delegate responsibilities to a non-CCO principal
False - a CCO may only delegate their supervisory responsibilities to another CCO
True or False: a CCO must have expertise on the products, have ability to prepare written supervisory procedures (WSPs) and have the ability to develop programs to test compliance with firm policies
True - which is why a firm may have more than one CCO
True or False: a CEO and CCO must meet inside of the BD’s fiscal year
False - the CEO must meet with the CCO at least every 12 months (each calendar year), NOT each fiscal year
How often must a CEO certify results of a CCO’s review of the BD’s SCPs?
each 12 months
When must a final compliance report of SCP be submitted to the BOD and audit committee?
within 45 days of CEO certification
Name for contact of a BD who is a senior member of management and acts as an official point of contact between the firm and FINRA
the Executive Representative
What is the deadline that FINRA sets for BDs to complete an annual verification of their contact information?
within 17 BUSINESS DAYS after the end of each calendar year
Submitted via FINRA Gateway Filing & Reporting System
What are four ways a restricted firm can address their FINRA designation?
1) voluntary staff reduction of RRs who’s disciplinary record was cause of firm’s failure to get minimum score
2) Consult w FINRA on remediation steps
3) Accept the assignment and seek lower maximum restricted deposit amount
4) Request a hearing w FINRA upon receipt of notice (will still be obligated to establish a restricted account with no less than 25% of maximum amount pending final determination of status)
What is the consequence of being designated a restricted firm by FINRA?
Required to maintain a restricted deposit amount (separate from its net capital requirements)
When must a business continuity plan be updated (4 instances)?
when ever a firm
1) takes on a new business line
2) updates its structure
3) makes changes to its operations
4) changes location
What are areas a BD’s BCP must address (5 areas)?
1) access to customer funds and securities
2) mission critical systems
3) data back-up
4) regulatory reporting and record keeping
5) alternative channels of communications and areas for work
What is the minimum number and profile of emergency contacts for a firm’s BCP?
TWO - firms may designate one member of senior mgmt who is a registered principal; AND one who is either an unregistered member of senior management or a registered principal
What if a BD only has one senior registered principal as a contact, who could be the second?
second contact has to know the BD’s business operations (e.g., an attorney, accountant, clearing firm etc)
True or false: customers must receive a full copy of a BD’s BCP? What about FINRA?
Re customers - False - only a summary
Re FINRA - true
When must customers receive a SUMMARY of a BD’s BCP?
1) at account opening
2) upon request
3) on the firm’s website
