A member firm’s public customer option business must be supervised by the firm in accordance with the supervision of its overall public customer business. Registered option and security futures principals (ROSFP) designated by the firm’s written supervisory procedures may supervise the member firm’s option business. The ROSFP is not required to complete the security futures firm element continuing education requirement and being designated as a ROSFP does not permit the ROSFP to supervise the member’s security futures business without satisfying the security futures firm element continuing education program.

Duties of the ROSFP

The registered option and security futures principal or ROSFP’s duties mainly focus on the supervision of the member firm’s option business. The ROSFP must supervise all of the member firm’s option transactions with customers and is additionally responsible for:

  • Developing the firm’s written supervisory procedures relating to option business
  • Developing the firm’s training program for option business
  • Reviewing discretionary account acceptance by branch managers and other ROSFPs
  •  Working with and assisting branch managers in supervising customer accounts

The ROSFP must also design and administer supervision programs to review selected option accounts to ensure proper supervision. The ROSFP may delegate most review and supervision duties to employees (usually ROSFPs) under their direct control but remains responsible for all of the areas of supervision.

Additional Duties of the ROSFP

The registered option and security future principal is also responsible for ensuring that the member firm’s option business complies with all laws and industry regulations relating to option business. The ROSFP must:

  • Establish the firm’s record keeping procedures relating to options
  • Review selected option accounts frequently
  • Establish guidelines and requirements for the firm’s option advertising
  • Approve all option advertising and sales literature prior to first use
  • Supervise account approval procedures
  • Supervise the creation of account approval forms
  • Develop the firm’s option training program
  • Review option discretionary accounts more frequently
  • Supervise the firm’s procedures for allocating assignment notices
  • Audit the firm’s option compliance program

Related Articles
  1. Financial Advisor

    How Advisors Can Create Compliance Programs

    Here's how investment advisers can set up a compliance program that adheres to SEC requirements.
  2. Tech

    Advisors: Are You Managing This Big Compliance Risk?

    A new study finds that supervision of electronic communications at financial advisory firms is falling short, putting them at risk.
  3. Investing

    A Detailed Look Into China's Options Market

    As the Chinese options market gradually takes shape, we provide an overview, including details of the initial phase and building blocks, primary beneficiaries, the impact on the overall financial ...
  4. Personal Finance

    Top 5 Books on Becoming an Options Trader

    For individuals aspiring to become options traders, here are five of the best books that offer help in understanding and profiting from the options markets.
  5. 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.
  6. Trading

    Google Stock Too Expensive for You? Try Options

    Learn how to invest in Google (now Alphabet, Inc.) and other high-value stocks with less capital by using options.
Trading Center