Effective December 1, 2014, there will be new rules for broker-dealer supervision. With these changes, FINRA is placing more burdens on a firm's supervisory system.
With respect to "supervisory systems", Rule 3110 covers the following:
- Establishing and maintaining written procedures and designating principals responsible for supervision.
- Designating offices of supervisory jurisdiction.
- Designating OSJ/non-OSJ branch principals.
- Supervision of one person OSJs.
- Assigning supervisors for registered representatives determining qualifications of supervisory personnel.
- Annual compliance meetings.
Of particular interest in this new rule is the provision governing single person OSJs (Rule 3110(b)(6)). It reminds firms that the single person OSJ cannot supervise himself and that, to avoid conflicts of interest, the firm must conduct focused reviews of the single OSJ.
As firms continue to grow and their supervisory systems gets stretched further and further, firms must refocus their use of single person OSJs. Although they are beneficial for firms with a diverse demographic foothold, Rule 3110(b)(6) reminds member firms that a single person OSJ is not an island onto itself.
Rule 3110 does not become a reality for eight months. Use that time wisely. Review your supervisory systems and take a particularly hard look if you are using single person OSJs.
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.
