Introduction

Welcome to Account Supervision and Approvals: the regulatory framework that ensures every broker-dealer maintains adequate oversight of its registered representatives, customer accounts, and business activities.

Exam Weight: Part of 9% (~11 questions across Chapter 2)

Video Resources

Live 1-on-1 tutoring with Dean Tinney ↗

What You'll Learn

In this unit, you'll cover:

  • The Supervisory System (FINRA Rule 3110): How firms organize supervision, designate principals, and classify offices (Offices of Supervisory Jurisdiction (OSJs) vs. branch offices vs. non-branch locations)
  • Required Approvals and Documentation: Which account types need heightened principal approval (options, margin, discretionary, day trading) and what documentation is required
  • Written Supervisory Procedures (WSPs): What WSPs must contain, where they must be kept, and how they must be maintained
  • Supervisory Control System (Rule 3120): The "supervision of supervision": testing, verification, and annual reporting to senior management
  • Account Maintenance and Ongoing Review: Internal inspections, transaction monitoring, applicant investigation, and annual compliance reviews
  • Safeguarding Customer Assets: SEC Rule 15c3-3 customer protection requirements, reserve accounts, and handling of cash, checks, and securities
  • Refusing, Restricting, or Closing Accounts: When a firm must or may decline accounts, freeze activity, or close relationships
  • Municipal Securities Supervision (Municipal Securities Rulemaking Board (MSRB) Rule G-27): Special supervisory obligations for municipal securities activities
  • Options Account Supervision (Chicago Board Options Exchange (Cboe) Rule 9.2): The Registered Options Principal role and options-specific oversight requirements

Why This Matters

Every securities professional operates within a supervisory structure. The exam tests your understanding of who approves what, which rules apply to which activities, and the consequences of supervisory failures. These questions often appear as scenarios where you must identify the correct approval requirement, the right inspection frequency, or the appropriate response to a compliance gap.

Let's start with the foundation of it all: the supervisory system under FINRA Rule 3110.