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. Trading

    Trading Options on Futures Contracts

    Futures contracts are available for all sorts of financial products, from equity indexes to precious metals. Trading options based on futures means buying call or put options based on the direction ...
  2. Insights

    Why Don’t Regulators Check All Financial Professionals?

    Reports indicate that there is a growing need for increased supervision of brokers.
  3. Financial Advisor

    How Advisors Can Create Compliance Programs

    Here's how investment advisers can set up a compliance program that adheres to SEC requirements.
  4. 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.
  5. Trading

    Factors That Determine Option Pricing

    A thorough understanding of factors that affect price is essential in options trading.
  6. Trading

    Options Hazards That Can Bruise Your Portfolio

    Learn the top three risks and how they can affect you on either side of an options trade.
  7. Trading

    The Basics Of Option Price

    Learn how options are priced, what causes changes in the price, and pitfalls to avoid when trading options.
Frequently Asked Questions
  1. What Licenses Do Financial Advisors Need to Have?

    Understand why all financial advisors are required to be licensed, and identify the specific licenses that must be obtained ...
  2. When Is Managerial Accounting Appropriate?

    Understand the difference between managerial accounting and financial accounting. Learn common scenarios in which managerial ...
  3. Do ETFs Generate Capital Gains for Shareholders?

    Learn how exchange-traded funds (ETFs) can generate taxable capital gains for shareholders due to occasional and substantial ...
  4. Why is there a negative correlation between quantity demanded and price?

    Learn what the law of demand is, the basic assumption of the law of demand and why there is a negative correlation between ...
Trading Center