Supervisory system | Compliance Guidebook

References

Source: FINRA
Type: Regulation
Date: Jul. 31, 2015

Regulatory Notice 14-10. Consolidated Supervision Rules: SEC Approves New Supervision Rules.

Source: FINRA
Type: Guidance
Date: Mar. 19, 2014

Summary

FINRA Rule 3110 requires that written procedures describe the supervisory system and include provisions for the prevention of conflicts of interest.

Text

The supervisory procedures required by this paragraph (b) shall set forth the supervisory system established by the member pursuant to paragraph (a) above, and shall include:

(A) the titles, registration status, and locations of the required supervisory personnel and the responsibilities of each supervisory person as these relate to the types of business engaged in, applicable securities laws and regulations, and FINRA rules.

(B) a record, preserved by the member for a period of not less than three years, the first two years in an easily accessible place, of the names of all persons who are designated as supervisory personnel and the dates for which such designation is or was effective.

(i) supervising their own activities; and

(ii) reporting to, or having their compensation or continued employment determined by, a person or persons they are supervising. . . .

(D) procedures reasonably designed to prevent the supervisory system required pursuant to paragraph (a) of this Rule from being compromised due to the conflicts of interest that may be present with respect to the associated person being supervised, including the position of such person, the revenue such person generates for the firm, or any compensation that the associated person conducting the supervision may derive from the associated person being supervised.

Text

. . . This provision does not impose a strict liability obligation to eliminate all conflicts of interest, but rather requires that the supervisory procedures be reasonably designed despite the firm’s conflicts of interest. . . .

Notes

None