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Written supervisory procedures

A firm's documented rules for how each regulatory obligation is met, who performs each review, and how exceptions are escalated and evidenced.

Regulators expect procedures that are specific to the firm's actual business, assign named responsibility, and describe the evidence a reviewer leaves behind. Generic manuals bought off the shelf are a recurring finding in examinations, because they describe activities the firm does not do and omit the ones it does.

Typical contents include account opening and customer-identification-program steps, suitability reviews, advertising approval, personal trading, error handling, complaint logging, business continuity, and escalation to the chief-compliance-officer.

Failure to supervise is a standalone charge. A firm can be sanctioned because its procedures were inadequate even where no customer lost money, which is why the manual is treated as an operational document rather than a formality.

Related: chief-compliance-officer, customer-identification-program, broker-dealer, finra

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