Written Supervisory Procedures (WSPs)

With the supervisory system and approval requirements in place, the firm needs a written document that spells out exactly how supervision works day to day. That document is the WSP.

What Must WSPs Cover?

WSPs must address supervision of all business types the firm engages in and all categories of associated persons. Specifically, WSPs must identify:

• The specific individuals responsible for each supervisory review
• The activities they will perform
• The frequency of review
• The manner of documentation (how reviews are recorded)

Topics WSPs Must Cover

• Review of investment banking and securities transactions
• Correspondence and internal communications review, specifically identifying:
  • Customer complaints
  • Funds and securities transmittals
  • Regulatory-required content
• Customer complaint handling procedures: capturing, acknowledging, and responding to every written complaint
• Supervisory personnel documentation, including:
  • The titles, registration status, and locations of required supervisory personnel and each person's responsibilities
  • Designations of responsibility
  • Conflict of interest prevention
  • Compensation structure oversight
  • A written record of every supervisory-personnel designation and its effective dates, kept for three years, with the first two years in an easily accessible place
• Safeguarding of customer funds and securities

Where Must WSPs Be Kept, and How Current Do They Have to Be?

• A current copy of the WSPs (or the relevant portions for that office) must be kept at each Office of Supervisory Jurisdiction (OSJ) and at each location where supervisory activities are conducted
• WSPs must be updated promptly whenever changes occur in:
  • Business activities (new products or services)
  • Personnel (supervisory staff changes)
  • Regulations (new or amended rules)
• The firm must promptly communicate WSPs and amendments to every associated person to whom they are relevant, based on that person's activities and responsibilities; a WSP update that never reaches the affected reps does not satisfy the rule

Exam Tip: Gotchas

• Having WSPs is not enough; they must be current, specific, and accessible. A firm that wrote WSPs five years ago and never updated them after adding options trading is in violation.
• The exam may present a scenario where a firm has WSPs but they don't cover a new line of business; that is a supervisory deficiency.
• WSPs must name specific individuals, not just job titles. "The compliance officer" is not sufficient if the firm doesn't identify who that person is.
• WSPs must be kept at each OSJ, not just at the home office.
• Outdated WSPs that don't reflect current business = violation.

What Should You Check on Exam Day?

• Can you list the four things WSPs must identify for every supervisory review: the specific individual, the activities, the frequency, and the manner of documentation?
• Do you know the five required WSP topics: investment banking/securities transaction review, correspondence review, complaint handling, supervisory personnel documentation, and safeguarding customer funds and securities?
• Do you know WSPs must be kept at each OSJ (and wherever supervisory activity occurs) and updated promptly for changes in business, personnel, or regulations?