Exercise

Answer the following questions.

1.Order execution can take place at which of the following?

A.A branch office only

B.An OSJ only

C.Either a branch office or an OSJ

D.Any office associated with a brokerage firm

2.An office where one or more associated employees are in the business of effecting but not executing the purchase or sale of a security is known as _____

3.How often must an OSJ be inspected?

4.How often must a branch office that does not supervise other branch offices be inspected?

5.Under FINRA rules on supervision, each _____ must participate in a compliance meeting every _____.

Answers: 1. B; 2. A branch office; 3. Annually; 4. Every three years; 5. Associated person; year

5.1.6. Member Supervisory Controls

It is not enough to establish and document a supervisory system that dictates procedures to monitor a firm’s compliance with regulatory rules and regulations. The procedures must also be enforced. To ensure that a supervisory system is functioning as required and that written procedures are scrupulously obeyed, FINRA requires that each member firm set in place a system of written supervisory controls to police and enforce compliance of its own supervisory system.

Accordingly, each member firm must identify one or more principals who shall establish, maintain, and enforce this system of supervisory controls. This designated principal or compliance officer has the responsibility to test and verify the success of the member firm’s supervisory procedures and to amend or create additional procedures as needed.

Each year, this designated principal must submit a report to the member firm’s senior management detailing the supervisory control system in place, the results of the compliance testing, any significant violations or exceptions that may have taken place during the year, and any amended procedures that may have been created in response.

For member firms that reported $200 million or more i