Supervisory Control System
Chapters in this video
- 0:00 Supervision rule vs. supervisory-control rule
- 1:41 The designated principal identified to FINRA
- 2:43 Test, verify, find gaps, amend procedures
- 3:47 Annual report goes to senior management
- 4:29 The $200M prior-year FOCUS threshold
- 5:39 Six compliance areas for large firms
- 6:31 Rapid-fire exam recap
What this video covers
- Why the supervisory-control rule is the "supervision of supervision," and how it differs from FINRA's general supervision rule that just requires written procedures
- Who the designated principal is, and why that person must be specifically identified to the Financial Industry Regulatory Authority (FINRA), not just any in-house principal
- The four-step cycle the designated principal owns: test, verify, identify gaps, then create or amend procedures to fix them
- Why the annual report goes to the firm's senior management and NOT to FINRA, a classic exam trap
- What the standard annual report must contain: description of the system, summary of test results and exceptions, and any amended procedures
- The $200 million gross revenue threshold for enhanced reporting, measured by the prior calendar year Financial and Operational Combined Uniform Single (FOCUS) report
- The six compliance areas large firms must discuss: trading and market activities, investment banking, antifraud and sales practices, finance and operations, supervision, and anti-money laundering
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