FINRA Podcast: Primary Supervision Requirement - Part 1

FINRA released the first in a five-part series of podcasts about FINRA's new Consolidated Supervision Rules. The first podcast highlights the Primary Supervision Requirement, which includes supervision of correspondence and communication.

In the podcast, FINRA explained that the new rules require, among other things, that firms have (i) a supervisory system in place that is "reasonably designed" to achieve compliance with applicable securities laws and regulations and FINRA rules; and (ii) written procedures for a registered principal to review all transactions relating to the firm's investment banking or securities business. In the podcast, FINRA notes that firms may use a risk-based system to review transactions, but that such a system must be "reasonably designed" so as to provide enough details to focus on risk areas, and to not be compromised by conflicts of interest related to the associated person being supervised.

Additionally, FINRA explained, the new rules change how "supervisors should themselves be supervised," since the rules require firms to establish procedures to prohibit supervisory personnel from supervising their own activities and reporting to a person who is under their supervision.

The podcast also reminded firms to update written supervisory procedures to reflect applicable amendments, and to retain and keep current a copy of these procedures at each location where the firm performs supervisory activities.

See: Transcription of Podcast; Listen to Podcast.See also: Lofchie's Guide to Broker-Dealer Regulation: Supervision Chapter