FINRA Rule 3010 details Supervision requirements. Members are required to maintain a supervisory system for their registered representatives. Written procedures must be created to ensure oversight of the representatives' activities in handling customer accounts. Branch offices must have a registered principal to supervise representatives. Members must conduct internal inspections at least once a year to ensure compliance with securities laws; these inspections must include a review of customer account records to detect irregularities and ensure compliance. Furthermore, each registered representative must participate in a meeting with a designated supervisory person to discuss compliance matters. All transactions and retail communication related to solicitation must be reviewed and given written approval by a registered principal.

Also, member firms must maintain an Office of Supervisory Jurisdiction (OSJ) for any office location where the following activities occur:

  • Approval of new accounts
  • Approval of retail communication
  • Order execution
  • Custody of customer funds or securities
  • Review of customer orders

Each OSJ must also maintain records of customer complaints and what actions were taken to resolve each issue. A complaint is defined as any written statement of a customer or any person acting on behalf of a customer. Complaints allege a grievance involving the activities of those persons under the control of the member in connection with the solicitation or execution of any transaction or the disposition of securities or funds of that customer. Supervision of registered representatives includes the following issues:

  • Qualifications investigated - Members must investigate the good character, business repute, qualifications and experience of any person prior to making such a certification in the application of such person for registration.
     
  • Notice of outside employment - The representative must provide written notice to the member firm and the employing member must approve the outside employment before taking on any outside employment or business activity in order to ensure no conflict of interest arises from such activity.
     
  • Regulation of securities transactions - The member firm must be notified of any account opened for the representative at another securities firm, and may request duplicate account statements. Also, the representative must not participate in any private securities transactions without prior written notice to the employer. An exception to this rule exists for mutual fund accounts and variable contracts registered under the Investment Company Act of 1940.


FINRA Conduct Rule 2830: Investment Company Securities

Related Articles
  1. Financial Advisor

    What Financial Advisors and Brokers Need to Know About Rule 407

    Learn about NYSE Rule 407 and how it may impact you as a financial advisor or investment broker. What you don't know about this regulation can hurt you.
  2. Personal Finance

    Get A Job In Compliance

    If you're a stickler for rules, this could be a promising career path for you.
  3. Insights

    FINRA: How It Protects Investors

    Find out the history of FINRA, and how it's organized to monitor the markets and protect investors.
  4. Financial Advisor

    How Advisors Can Create Compliance Programs

    Here's how investment advisers can set up a compliance program that adheres to SEC requirements.
  5. Financial Advisor

    Finra Releases Q&A Guidance on Recruiting

    FINRA has issued further guidance on its recruiting practices rule, which includes clarifying the definition of a former customer.
  6. Financial Advisor

    What The Series 24 Exam Won't Teach You

    Can you handle being the judge and jury in your firm? Find out what surprising tasks a job as a principal entails.
  7. Financial Advisor

    Professional Correspondence That Pushes The Envelope

    Learn the difference between correspondence and sales literature, according to NASD rules.
  8. Financial Advisor

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  9. Trading

    Basics Of The Mechanics Behind Electronic Trading

    What was once associated with shouting traders and wild hand gestures has now become more closely associated with statisticians and computer programmers.
  10. Small Business

    Wall Street: Where The Customer Is Always Wrong

    In the financial industry, there's not much emphasis placed on dealing with customer complaints, but there should be.
Frequently Asked Questions
  1. Who are Whole Foods' (WFM) main competitors?

    Learn more about Whole Foods Markets, who insists its products are sustainable. Thanks to the competition, however, its marketing ...
  2. What are the Differences Between Ex Works (EXW) and Free On Board (FOB)?

    Learn about Ex Works and Free on Board, the main difference between these Incoterms, and the responsibilities of buyers and ...
  3. What are Common Examples of Monopolistic Markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ...
  4. What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold, but ...
Trading Center