Broker-Dealer Supervision and Control

This sheet condenses how a firm divides duties, documents supervision, and keeps obligations running when something goes wrong.

Which One-Liners Win Points?

• The supervisory system and the WSPs are not the same thing. The system is the operating structure; the WSPs document how it carries out supervision, and final responsibility always stays with the firm.
• Segregation of duties bars three things. A supervisor may not supervise their own activities, report to a person they supervise, or let that person set their pay or continued employment.
• Four controls answer four different questions. An information barrier limits information flow, access control limits physical or systems entry, an entitlement policy names authorized files and systems, and an information-access restriction names who may access the information.
• A WSP update is not an annual-only event. The firm promptly amends WSPs when the law or its own supervisory system changes, then promptly communicates the change to the affected associated persons.
• The annual certification covers processes, not perfect compliance. The chief executive officer or an equivalent officer certifies the firm has processes to establish, maintain, review, test, and modify its WSPs.
• One person both approves and reviews the business continuity plan. The rule places the plan with a senior-management registered principal, not with a committee.
• A website does not replace the account-opening disclosure. A firm with a website must still deliver written disclosure at account opening, and mail it when a customer requests it.

Which Numbers Matter Most?

What Must the Supervisory System and WSPs Include?

• The supervisory system organizes the people, offices, assignments, and processes used to supervise the firm's business, and it must be reasonably designed for compliance.
• The WSPs set out that system in writing. Persons the firm designates conduct the annual compliance discussion as an individual interview or a group meeting, covering matters relevant to each participant's activities.

What Must the Business Continuity Plan Cover?

• The plan must be written and reasonably designed to help the firm meet its existing customer obligations, and it must also address existing relationships with other broker-dealers and counterparties.
• Written disclosure goes to customers at account opening. The firm posts that disclosure on its website if it has one, and mails it when a customer requests it.
• The usual emergency-contact structure names two associated persons. If the second is not a registered principal, that person must be a senior manager who knows the firm's operations.

Which Gotchas Trip Students Up?

• The self-supervision bar has a documented exception. When firm size or the supervisor's position makes separation impossible, the firm documents why the alternative still provides compliant supervision.
• Writing the WSPs and testing them are separate jobs. The firm establishes and maintains the WSPs; designated principals separately test and verify whether those WSPs are reasonably designed.
• An amendment must reach the relevant people. Updating the central WSP document without promptly communicating the change does not complete the requirement.
• The retention rule has two conditions, not one. Preserve the supervisory-personnel record for at least three years, and keep it easily accessible for the first two years.

One-Breath Recap

Broker-dealer supervision runs on three legs: written supervisory procedures document the firm's supervisory system, get promptly amended and communicated when the law or the system changes, and get annually certified by the chief executive officer, while segregation of duties keeps one person from supervising their own work, reporting to a subordinate, or letting a subordinate control their pay, with designated principals testing whether the whole structure is reasonably designed. A written business continuity plan closes the loop, naming one senior-management registered principal to approve and review it, and disclosing to customers at account opening, on the website, and by mail on request, how the firm keeps their obligations moving through a disruption.

Need more than the recap? Read the full Broker-Dealer Supervision and Control unit.