3120. Supervisory Control System
(a) Each member shall designate and specifically identify to FINRA one or more principals who shall establish, maintain, and enforce a system of supervisory control policies and procedures that:
(1) test and verify that the member's supervisory procedures are reasonably designed with respect to the activities of the member and its associated persons, to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules; and
(2) create additional or amend supervisory procedures where the need is identified by such testing and verification. The designated principal or principals must submit to the member's senior management no less than annually, a report detailing each member's system of supervisory controls, the summary of the test results and significant identified exceptions, and any additional or amended supervisory procedures created in response to the test results.
(b) Each report provided to senior management pursuant to paragraph (a) in the calendar year following a calendar year in which a member reported $200 million or more in gross revenue must include, to the extent applicable to the member's business:
(1) a tabulation of the reports pertaining to customer complaints and internal investigations made to FINRA during the preceding year; and
(2) discussion of the preceding year's compliance efforts, including procedures and educational programs, in each of the following areas:
(A) trading and market activities;
(B) investment banking activities;
(C) antifraud and sales practices;
(D) finance and operations;
(E) supervision; and
(F) anti-money laundering.
(c) For purposes of paragraph (b), "gross revenue" is defined as:
(1) total revenue as reported on FOCUS Form Part II or IIA (line item 4030) less commodities revenue (line item 3990), if applicable; or
(2) total revenue as reported on FOCUS Form Part II CSE (line item 4030) less, if applicable, (A) commissions on commodity transactions (line item 3991); and (B) commodities gains or losses (line items 3924 and 3904).
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Amended by SR-FINRA-2013-025 eff. Dec. 1, 2014. Amended by SR-NASD-2005-084 eff. Feb. 14, 2006. Amended by SR-NASD-2005-121 eff. Oct. 14, 2005. Amended by SR-NASD-2004-116 eff. Jan. 31, 2005. Adopted by SR-NASD-2002-162 eff. Jan. 31, 2005. Selected Notices: 04-71, 05-29, 06-04, 14-10. |
- Regulatory Notice 17-27August 30, 2017
- Regulatory Notice 14-10March 19, 2014