Welcome to Supervisory Approvals for Accounts: the principal-level review and sign-off duties behind every account your firm opens, and the firm-level review and documented customer confirmation, notification, or follow-up duties that apply when an account's information changes.
Exam Weight: 1 scored item within Function 2 (9 items / 18% of exam)
What You'll Learn
In this unit, you'll cover:
- The Supervisory System, Written Procedures, and Control Testing: what a firm's supervisory system must provide for, and how a designated principal tests whether it actually works
- Principal Approval of New Accounts: the written, principal-level review that must happen before an account can open
- Supervisory Review of Representative Correspondence and Activity: how a firm reviews correspondence and internal communications, and what counts as a sufficient review
- Reviewing and Validating Account Maintenance Changes: the firm review and the documented customer confirmation, notification, or follow-up step required after an account's information changes
- Safeguarding Cash, Checks, and Securities: the physical handling, reporting, and recordkeeping duties that attach to customer funds and securities the firm receives, delivers, or holds
- Refusing and Closing Accounts: Where the Authority Sits: who has the authority to refuse or close an account, and when a failed identity check forces that decision
Why This Matters
A representative does not have unilateral authority to open or change a customer account. Opening runs through a principal's documented review. Changing an account's information runs through the firm's own procedures and a documented customer confirmation, notification, or follow-up step. Closing an existing account is not assigned the way opening is; a firm decides that under its own written procedures.
The exam tests whether you know which review applies to which action, and who may perform it.
This unit also covers the firm's physical safeguarding duties for customer cash, checks, and securities, which is where a private-placement representative most often intersects with the firm's back office.
Let's start with the supervisory system that makes all of this happen.