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)
What You'll Learn
In this unit, you'll cover:
- The Supervisory System: 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: 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: the customer-protection rule 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: Special supervisory obligations for municipal securities activities under the MSRB supervision rule
- 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.