Policy required document Financial
FINRA Written Supervisory Procedures
FINRA Rule 3110 requires every member broker-dealer to establish, maintain and enforce written procedures to supervise the types of business it engages in and the activities of its associated persons.
The WSPs are more prescriptive than an adviser's compliance manual: for each business activity they must identify the responsible supervisor by title and registration, the supervisory steps, how often they are performed, and how the review is evidenced.
The rule also requires an annual compliance meeting, review of correspondence and internal communications, transaction review, internal inspections on a set schedule, and procedures for supervising supervisors.
Three companion rules generate the records around the WSPs. Rule 3120 requires a system of supervisory control policies that tests the WSPs and an annual report to senior management. Rule 3130 requires the CEO to certify annually that the firm has processes to establish, maintain, review, test and modify its written compliance policies and WSPs, after meeting with the CCO.
Rule 4511 requires the firm to keep the WSPs and amendments as records. FINRA examinations begin with a request for the WSPs in effect during the review period.
Obligation ledger
Who requires it, and what each one says.
| Source | Applies when | What it requires | Status |
|---|---|---|---|
| FINRA Rule 3110(b) Rule 3110(b)(1) to (7) | Every member firm | Written procedures to supervise each type of business and associated person activity; procedures for review of transactions, correspondence and internal communications, customer complaints, and outside business activities; the WSPs must state the supervisor's title, registration, location, the review steps and frequency, and how the review is evidenced. Legally required under FINRA rules approved by the SEC. | Mandatory |
| FINRA Rule 3110(a)(7) and (b)(7) Annual compliance meeting; maintenance of WSPs | Every member firm | Each registered representative and registered principal participates at least annually in a compliance meeting or interview; the firm keeps a copy of the WSPs at each office where supervisory activities occur and promptly amends them when rules or business change, communicating amendments to all associated persons. Legally required. | Mandatory |
| FINRA Rule 3110(c) Internal inspections | Every member firm | Inspect offices of supervisory jurisdiction and supervising branch offices at least annually, other branches at least every three years, and non-branch locations on a periodic schedule; written inspection reports kept three years. Legally required. | Mandatory |
| FINRA Rule 3120 Supervisory control system and annual report | Every member firm; additional content for firms with $200 million or more in gross revenue | Supervisory control policies and procedures that test and verify the WSPs, one or more designated principals, and an annual report to senior management summarizing test results, gaps and changes. Legally required. | Mandatory |
| FINRA Rule 3130 Annual CEO certification | Every member firm | Designate one or more CCOs on Schedule A of Form BD; CEO certifies annually, after meeting with the CCO, that the firm has processes to establish, maintain, review, test and modify written compliance policies and WSPs; a written report documenting the processes is provided to the board and audit committee. Legally required. | Mandatory |
| FINRA Rule 4511 and SEC Rule 17a-4 Books and records | Every member firm | Preserve the WSPs and each amendment for three years after they are no longer in effect, in a format meeting 17a-4. Legally required. | Mandatory |
| FINRA examination program Annual Regulatory Oversight Report; exam request letters | FINRA cycle or cause examination | WSPs in effect during the review period, evidence that each named review was performed (initials, dates, exception reports), the 3120 report, the 3130 certification and CCO meeting notes, annual compliance meeting attendance records. Examiner expectation. | Implied |
Required sections
- Supervisory structure: designated principals, offices of supervisory jurisdiction, branch offices, and the supervisor for each location (3110(a))
- For each business activity: the responsible supervisor by title and registration, the review steps, frequency, and how the review is evidenced (3110(b)(1))
- Transaction review procedures, including risk-based review of trades (3110(b)(2))
- Correspondence and internal communications review, including electronic communications and evidence of review (3110(b)(4))
- Customer complaint capture, review and reporting (3110(b)(5), 4530)
- Outside business activities and private securities transactions (3110(b)(3), 3270, 3280)
- Supervision of supervisory personnel and conflict-of-interest procedures for supervising one's own activities (3110(b)(6))
- Annual compliance meeting procedure and attendance records (3110(a)(7))
- Internal inspection program, schedule, scope and report content (3110(c))
- Registration and qualification, continuing education, heightened supervision (3110(a)(6), 1240)
- Anti-money laundering program cross-reference (3310)
- Supervisory control system testing and the annual 3120 report (3120)
- CEO certification process and CCO meeting (3130)
- Communications with the public review and approval (2210)
- Books and records, including WSP version retention (4511, 17a-4)
- WSP amendment process and communication of changes to associated persons (3110(b)(7))
- Remote inspections pilot or residential supervisory location procedures where adopted (3110.18, 3110.19; single source, time-limited; verify)
What the examiner asks for
What changed
Change log.
Frameworks
Where this document is required.
Who looks at it
Where this document gets checked.
No one certifies a document like this on its own. It is read during the audits and inspections below, and by the agency behind each rule.
| Where it is looked at | Who looks at it |
|---|---|
| FINRA 3110 WSPs | FINRA Member Supervision examiners conduct cycle and cause examinations; SEC Division of Examinations examiners also review supervision. There is no certification |
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Questions
What people ask.
How are WSPs different from an RIA compliance manual?
WSPs must name who supervises what, how often, and how the review is evidenced. A compliance manual states policy; WSPs are operating instructions with an audit trail. Dual registrants keep both.
How often does FINRA expect the WSPs to be updated?
Promptly after any rule change or change in business, and in practice after each 3120 testing cycle. A WSP manual with a single date years old is a standard exam finding.
What is the 3120 report?
An annual report to senior management summarizing the tests performed on the supervisory system, the gaps found, and the changes made. Firms with $200 million or more in gross revenue add specific content on trading, investment banking and other areas.
Does the CEO certification require anything new each year?
The CEO must meet with the CCO in the preceding twelve months, review the compliance report, and sign the certification. The report documenting the firm's processes goes to the board and audit committee. Keep the meeting notes.
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