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.

BREAKING DOWN Senior Registered Options Principal (SROP)

FINRA decided that multiple employees could manage an 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 options and security futures principal.

The exam, which all senior registered options principals had to pass—the Series 4 exam—assessed the competency of an entry-level options principal candidate to perform his or her job as a registered options principal.

The exam measured the degree of knowledge needed to perform the critical functions of a registered options principal, including the rules and statutory provisions applicable to the supervisory management of a firm’s options personnel, accounts and trading, as well as exchange rules and regulations applicable to the trading of options contracts.

More Rule Changes for Senior Registered Options Principals

On June 26, 2017, FINRA again changed the rules 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.

The new rule provided that each person engaged in the investment banking or securities business of a FINRA member must register with FINRA as a representative or principal in each category of registration appropriate to the person’s functions and responsibilities as specified in proposed Rule 1220, unless exempt from registration pursuant 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 otherwise stated in the rules.

Proposed Rule 1210 was due to become effective on Oct. 1, 2018. It provided that each member, except a FINRA member with only one associated person, shall have at least two officers or partners who are registered as general securities principals, provided that, a member whose activities are limited in scope, may instead have two officers or partners who are registered in a principal category that corresponds to the scope of the member’s activities. The requirement stipulated that a member must have a minimum of two principals, if they were a broker-dealer seeking to become FINRA members. The rule also applied to existing member broker-dealers.