What Does Compliance Registered Options Principal Mean?

The Compliance Registered Options Principal (CROP) was a supervisory and compliance position that FINRA required of options trading firms until June 2008.

Understanding Compliance Registered Options Principal

A firm was required to employ a Compliance Registered Options Principal (CROP) 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.

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, an officer or general also responsible for supervising options exposure and trading activity in clients' accounts.

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.