Introduction

Welcome to Supervisory Approvals for Accounts: the three-rule framework that makes every new account opening, account change, and transaction binding under FINRA rules.

Exam Weight: Part of 16% (8 questions across Chapter 2)

What You'll Learn

In this unit, you'll cover:

• Supervisory System Framework (FINRA Rule 3110): The written supervisory procedures (WSPs), principal designations, Office of Supervisory Jurisdiction (OSJ) requirements, and branch office inspection cycle that define how every firm supervises its registered representatives (reps)
• Required Reviews, Approvals, and Documentation: The principal signature that opens accounts under Rule 4512, the written approval that changes account names under Rule 4515, discretionary-authority approval under Rule 3260, and the correspondence and transaction reviews required under Rule 3110(b)
• Physical Receipt, Delivery, and Safeguarding of Customer Assets: The "noon next business day" standard for forwarding checks, subscription-way handling for mutual fund and variable contract applications, and the logging and custody controls WSPs must address
• Refusing, Restricting, and Closing Accounts: When the firm refuses to open, when it restricts existing activity (including FINRA Rule 2165 temporary holds for senior investors), and when it closes the account, all documented and approved by a principal
• Supervisory Control System (FINRA Rule 3120): The system of supervisory control policies and procedures (SCPs) that tests whether Rule 3110 procedures actually work, including the annual report to senior management
• Municipal Securities Supervision (MSRB Rule G-27): The parallel supervisory framework for municipal fund securities, requiring a qualified Series 51 or Series 53 principal for 529 plans, Local Government Investment Pools (LGIPs), and Achieving a Better Life Experience (ABLE) accounts
• Putting It Together: How Rule 3110, Rule 3120, and MSRB G-27 operate as complementary (not alternative) layers of the supervisory system

Why This Matters

The Series 6 exam tests whether you can tell:

• Principal vs. supervisor: only a registered principal can sign statutorily required written approvals; supervisors can run day-to-day oversight but final approval authority sits with the principal
• Annual vs. three-year inspections: OSJs and supervising branches must be inspected at least annually; non-supervising branches and non-branch locations on a regular schedule presumed to be at least every three years
• "Subscription-way" handling: customers write the check payable to the mutual fund or insurance company, never to the broker-dealer and never to the rep personally
• "Promptly transmit" standard: no later than noon of the next business day after receipt
• Rule 3110 vs. Rule 3120: 3110 is supervision; 3120 is supervising the supervision (testing + annual report to senior management)
• MSRB G-27 parallels FINRA 3110: a 529 plan question is a G-27 question, requiring a Series 51 or Series 53 principal rather than a Series 26 principal

Every fact supports the principal's approval file, the firm's WSPs, and the rep's ability to document that the supervisory system worked as designed.

Let's start with the supervisory system framework that makes every other approval possible.