Series 63: 2.1.3 Broker-Dealer Supervision Of Agents

2.1.3  Broker-Dealer Supervision of Agents

The supervision of agents is one of the key responsibilities of a broker-dealer. The Securities Exchange Act of 1934 notes that the SEC can take punitive action against any broker-dealer that has willfully violated, enabled the violation, or failed to supervise a violator of applicable securities law and regulations who is employed by the firm. This means that if a broker-dealer does not adequately supervise one of its employees, the Feds can get involved. The Act goes on to say, however, that no supervisor will have failed in his duties if a supervisory system and procedures have been established and dutifully applied to detect and prevent such violations.

An acceptable supervisory system must include a written description of the member firm’s supervisory responsibilities and a set of written supervisory procedures that will govern the activities of its registered employees. The firm must make sure that it has supervisory controls in place. The broker-dealer also must conduct periodic inspections to help ensure