Introduction

Welcome to Written Supervisory Procedures and Controls: the requirements that govern how a broker-dealer designs, documents, tests, and certifies the system that watches over its associated persons. This unit is the supervisory backbone of Function 2 on the Series 24 exam.

Exam Weight: Part of 30% (~45 questions across Function 2)

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What You'll Learn

In this unit, you'll cover:

  • FINRA Supervisory System Requirements: The seven structural pillars of the supervisory system, the mandatory content of Written Supervisory Procedures (WSPs), and the firm-specific scaling factors that adjust supervision to firm size and complexity
  • Office Classifications and Inspections: The Office of Supervisory Jurisdiction (OSJ) definition, the branch-versus-non-branch test, the annual versus three-year inspection cadence, the Residential Supervisory Location (RSL) framework effective June 1, 2024, the Remote Inspections Pilot Program effective July 1, 2024, and the SEC's six-and-twelve-month inspection windows for newly registered broker-dealers
  • Internal Supervisory Controls: The duty to test and verify WSPs, the use of risk-based methodologies and sampling, the annual report to senior management, and the enhanced content for firms with $200 million or more in gross revenue
  • CEO Annual Certification: The chief executive officer (CEO) personal certification, the required CEO meeting with the Chief Compliance Officer (CCO) within the preceding 12 months, and the 45-day report deadline to the board of directors
  • Business Continuity Plan (BCP): The 10 mandatory elements (data backup, mission-critical systems, alternate communications, prompt customer access to funds and securities), the senior-management/registered-principal approval and annual review, and the two-emergency-contact-person filing through the FINRA Contact System (FCS)
  • Member Filing Requirements: The duty to keep contact information current through the Central Registration Depository (CRD) and FCS, including Executive Representative and Emergency Contact Person designations
  • Manual Distribution: The duty to make a current copy of the FINRA Manual available to customers on request, satisfied by electronic access

Why This Matters

The Series 24 exam tests three principal-level questions on this material:

  • Whether a firm's supervisory system meets the seven structural pillars and is reasonably scaled to the firm's size, complexity, and business mix
  • Which inspection cadence applies to which office type (annual for OSJs and supervising branches, three years for non-supervising branches and non-branch locations)
  • How the three-layer certification stack (supervisory system, internal supervisory controls, CEO certification) operates as a single program, with the CEO personally certifying that processes are in place and the CCO running the underlying compliance function

A firm with perfect WSPs that does not test them violates the internal-controls requirement; a firm with WSPs and testing but no CEO certification violates the certification requirement. The exam pairs these requirements because regulators do.

Let's start with the foundational supervisory framework that everything else in this unit builds on: the FINRA supervisory system.