Steps for Designing a Supervisory Control System

 

Conduct an inventory of the businesses in which the firm engages and applicable securities laws, regulations and FINRA rules.

  • Determine the requirements of the applicable securities laws, regulations and FINRA rules and any conduct that may be prohibited, compelled, limited or conditioned. Also determine who is responsible for supervising the conduct and how compliance with such requirements is monitored.

  • Determine if internal firm policies further curtail conduct beyond regulatory requirements.

  • Compare the information gathered to the current supervisory procedures to determine if there are any gaps, deficiencies or inaccuracies in the existing supervisory procedures.

  • In conducting this analysis, firms should review whether:
    • the launch of new business lines or products calls into question the sufficiency of existing supervisory procedures;

    • changes in the securities laws, regulations and FINRA rules require revisions to the supervisory procedures; and

    • customer complaints, litigation, branch office exams, other internal audits or regulatory issues reported in the media necessitate revisions to existing supervisory procedures.

  • The information gleaned from this analysis should be developed into new or amended supervisory procedures and SCPs that resolve any identified gaps, deficiencies or inaccuracies.

For more information on these guidelines, please see NASD Notice to Members 05-29.