Rule 722. Supervision of Accounts
This rule is no longer applicable effective February 17, 2009.
(a) Duty to Supervise; Senior Registered Options Principal
Every member organization shall develop and implement a written program for the review of the organization's non-member customer accounts and all orders in such accounts, insofar as such accounts and orders relate to option contracts. This program shall be under the supervision of a general partner or officer of the member organization who is a Registered Options Principal and who has been specifically identified to the Exchange as the member organization's Senior Registered Options Principal.
Every member and member organization shall also develop and implement specific written procedures concerning the manner of supervision of customer accounts maintaining uncovered short (written) option positions and specifically providing for frequent supervisory review of such accounts.
Every member organization shall develop and implement a written program for the review of the organization's non-member customer accounts and all orders in such accounts, insofar as such accounts and orders relate to option contracts. This program shall be under the supervision of a general partner or officer of the member organization who is a Registered Options Principal and who has been specifically identified to the Exchange as the member organization's Senior Registered Options Principal.
Every member and member organization shall also develop and implement specific written procedures concerning the manner of supervision of customer accounts maintaining uncovered short (written) option positions and specifically providing for frequent supervisory review of such accounts.
(b) Compliance Registered Options Principal
Member organizations shall designate and specifically identify to the Exchange a Compliance Registered Options Principal, who may be the Senior Registered Options Principal and who shall have no sales functions and who shall be responsible to review and to propose appropriate action to secure the member organization's compliance with securities laws and regulations and Exchange rules in respect of its options business. The Compliance Registered Options Principal shall regularly furnish reports directly to the compliance officer (if the Compliance Registered Options Principal is not himself the compliance officer) and to other senior management of the member organization. The requirement that the Compliance Registered Options Principal have no sales functions shall not apply to a member organization that has received less than $1,000,000 in gross commissions on options business as reflected in its FOCUS Report for either of the preceding two fiscal years or that currently has ten or less Registered Options Representatives.
Member organizations shall designate and specifically identify to the Exchange a Compliance Registered Options Principal, who may be the Senior Registered Options Principal and who shall have no sales functions and who shall be responsible to review and to propose appropriate action to secure the member organization's compliance with securities laws and regulations and Exchange rules in respect of its options business. The Compliance Registered Options Principal shall regularly furnish reports directly to the compliance officer (if the Compliance Registered Options Principal is not himself the compliance officer) and to other senior management of the member organization. The requirement that the Compliance Registered Options Principal have no sales functions shall not apply to a member organization that has received less than $1,000,000 in gross commissions on options business as reflected in its FOCUS Report for either of the preceding two fiscal years or that currently has ten or less Registered Options Representatives.
(c) Maintenance of Customer Records
Background and financial information of customers who have been approved for option transactions shall be maintained at both the branch office servicing the customers' accounts and the principal supervisory office having jurisdiction over that branch office. Copies of account statements of options customers shall be maintained at both the branch office supervising the accounts and the principal supervisory office having jurisdiction over that branch for the most recent six-month period. With respect solely to the above-noted record retention requirements applicable to principal supervisory offices, however, the customer information and account statements may be maintained at a location other than the principal supervisory office if such documents and information are readily accessible and promptly retrievable. Other records necessary to the proper supervision of accounts shall be maintained at a place easily accessible both to the branch office servicing the customer's account and to the principal supervisory office having jurisdiction over that branch office.
Background and financial information of customers who have been approved for option transactions shall be maintained at both the branch office servicing the customers' accounts and the principal supervisory office having jurisdiction over that branch office. Copies of account statements of options customers shall be maintained at both the branch office supervising the accounts and the principal supervisory office having jurisdiction over that branch for the most recent six-month period. With respect solely to the above-noted record retention requirements applicable to principal supervisory offices, however, the customer information and account statements may be maintained at a location other than the principal supervisory office if such documents and information are readily accessible and promptly retrievable. Other records necessary to the proper supervision of accounts shall be maintained at a place easily accessible both to the branch office servicing the customer's account and to the principal supervisory office having jurisdiction over that branch office.
(d) Branch Office
No branch office of a member organization shall transact options business with the public unless the principal supervisor of such branch office accepting option transactions has been qualified as a Registered Options Principal; provided, that this requirement shall not apply to branch offices in which not more than three Registered Options Representatives are located, so long as the options activities of such branch offices are appropriately supervised by a Registered Options Principal.
No branch office of a member organization shall transact options business with the public unless the principal supervisor of such branch office accepting option transactions has been qualified as a Registered Options Principal; provided, that this requirement shall not apply to branch offices in which not more than three Registered Options Representatives are located, so long as the options activities of such branch offices are appropriately supervised by a Registered Options Principal.
• • • Supplementary Material: --------------
.10 The Senior Registered Options Principal, in meeting his responsibility for supervision of customer accounts and orders, may delegate to qualified principals or employees, including other Registered Options Principals, responsibility and authority for supervision and control of any branch office customer transactions in option contracts, provided that such Senior Registered Options Principal shall have overall authority and responsibility for establishing appropriate procedures of supervision and control to determine that such delegated responsibility and authority is being properly exercised.
.20 Each member organization shall maintain, at the principal supervisory office having jurisdiction over the office servicing the customer's account, or have readily accessible and promptly retrievable, information to permit review of each customer's options account, on a timely basis to determine (i) the compatibility of option transactions with investment objectives and with the types of transactions for which the account was approved; (ii) the size and frequency of option transactions; (iii) commission activity in the account; (iv) profit or loss in the account; (v) undue concentration in any class or classes of options; and (vi) compliance with the provisions of Regulation T of the Federal Reserve Board.
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Amendments. October 7, 1982. September 20, 1989. January 30, 1995. |