What Is Senior Registered Options Principal (SROP)?

A senior registered options principal is an officer or general partner of an options trading firm who supervises options exposure and trading activity in clients' accounts. SROPs also must have passed the Series 4 exam.

FINRA eliminated the requirement for firms to have an SROP in June 2008. It also eliminated the requirement for firms to have a Compliance Registered Options Principal (CROP) to oversee the firm's regulatory compliance for its options trading activities, a position that was sometimes held by the SROP.

Understanding Senior Registered Options Principal (SROP)

FINRA decided multiple employees could manage a senior registered options principal's former responsibilities, as long as the options trading firm continued to meet its supervisory and compliance requirements. Anyone supervising a firm's options and security futures business, including its sales and advertising activities, however, must be a registered option and security futures principal.

The Series 4 exam was a requirement for all SROPs. It evaluated how competent entry-level options principal candidates were when it came to their job performance as registered options principals. It also measured the knowledge a professional required to perform some of the responsibilities of a registered options principal. These functions included the following:

  • The rules and provisions that apply to a firm’s options personnel management
  • Accounts
  • Trading
  • The exchange rules and regulations relating to options contracts trading

More Rule Changes for Senior Registered Options Principals

On June 26, 2017, FINRA changed the rules again by approving a new rule—SR-FINRA-2017-007—to revise examination requirements and create a general knowledge examination and specialized knowledge examinations and amend continuing education requirements, among other changes.

Under the new rule, everyone engaged in an investment banking or securities role at a FINRA member business was required to register with FINRA as a representative or principal in every category as they applied to their responsibilities and job functions as per Rule 1220. This was, of course, unless they were exempt from registration according to proposed Rule 1230. Proposed Rule 1210 also provided that such person is not qualified to function in any registered capacity other than that for which the person is registered, unless the rules indicated otherwise.

Proposed Rule 1210 was due to become effective on Oct. 1, 2018. Except for members with only one associated person, each member firm had to have at least two officers or partners registered as general securities principals. A member with limited activities, though, could have two partners registered in a principal category corresponding to the scope of the member’s activities. According to the requirement, a minimum of two principals were required broker-dealer firms were seeking to become FINRA members. The rule also applied to existing-member broker-dealers.