Checklist for Supervisory Control Procedures

 

Your written SCPs should include:

  • Identification of the principal(s) designated to establish, maintain and enforce the firm's system of supervisory control policies and procedures.

  • Who and when your firm will test and verify that its supervisory procedures are sufficient and amend or create additional supervisory procedures where the testing and verification identify a need.

  • How your firm will test the sufficiency of supervisory procedures. For example, the review of audit reports, compliance and regulatory examinations, complaints, litigation, internal surveillance and other testing, new legal and regulatory requirements, changes in a firm's business mix, etc., and the determination from such review that a firm's supervisory procedures are sufficient.

  • Who and when your firm will prepare and submit an annual report to the firm's senior management describing the firm's system of supervisory controls, the summary of the test results, any significant identified exceptions and any deletions, additions or amendments to the supervisory procedures made in response to the test results. Reports must be prepared and submitted no later than one year from the date of the last report.

  • The steps your firm will take to identify producing managers and any 20-percent producing managers and who will perform the identification.

  • Determination of whether your firm needs to rely on the limited size and resources exception.

  • If your firm utilizes the limited size and resource exception it must notify FINRA via the Firm Gateway of your firm's reliance on the exception as well as set out in your firm's SCPs the basis for the firm's use of the exception and alternate method of supervision and the person(s) responsible for implementing such supervision.

  • Who, how and when your firm will review and supervise on a day-to-day basis the customer account activity conducted by its producing managers.

  • How your firm will conduct heightened supervision of producing managers who meet Rule 3012's 20-percent threshold as well as who will conduct the supervision.

  • Who, how and when your firm will review, monitor and confirm:
    • all transmittals of funds and securities from customers to third-party accounts, to outside entities, to locations other than a customer's primary residence or between customers and registered representatives;

    • customer changes of address; and

    • customer changes of investment objectives.