Compliance Registered Options Principal (CROP)

What Is the Compliance Registered Options Principal (CROP)?

The Compliance Registered Options Principal (CROP) was a supervisory and compliance employee position that the Financial Industry Regulatory Authority (FINRA) required of options trading firms. This requirement was eventually eliminated in June 2008.

Key Takeaways

  • Compliance Registered Options Principal (CROP) was a supervisory and compliance employee position that FINRA required of options trading firms.
  • This requirement was eventually eliminated in June 2008.
  • The CROP was employed as an options firm's general partner or officer and was responsible for ensuring regulatory compliance for its clients' options trading activities.
  • The CROP could also act as the Senior Registered Options Principal (SROP), another position formerly required by FINRA.
  • To become a CROP, a person had to pass the Series 4 exam in the United States and the Options Supervisors Course in Canada.

Understanding the Compliance Registered Options Principal (CROP)

A firm was required to employ a Compliance Registered Options Principal as a firm’s officer or general partner and had the responsibility for ensuring regulatory compliance for its options trading activities for clients' accounts. The person also oversaw interactions with the public, such as advertising and marketing. The CROP could also act as the Senior Registered Options Principal (SROP), another position formerly required by FINRA. The SROP was an officer or general also responsible for supervising options exposure and trading activity in clients' accounts.

Although trading options can be an investment tool used to reduce risk, they are also very dangerous in the hands of the wrong people; thus, the need for regulation.

To become a CROP, a person had to pass the Series 4 exam in the United States and the Options Supervisors Course in Canada.

The End of CROP

FINRA finally eliminated the CROP position because other financial designations could manage the responsibilities formerly required of CROPs. So, it decided that if firms continued to fulfill their supervisory and compliance requirements, they weren’t needed. That’s the same reason FINRA did away with the SROP position.

The changes did not eliminate the requirement for firms to appoint a Registered Options and Security Futures Principal (ROSFP) to oversee the firm's public activities, such as the content of advertisements, educational materials, and sales literature. The changes also made the ROSFP responsible for ensuring that customers could handle the risks of options trading and understand the transactions proposed for their discretionary accounts.