FINRA Provides Guidance on Supervising Options Accounts
Commentary by Steven Lofchie
FINRA provided guidance on supervising options trading account approvals and monitoring account activity. The guidance was issued in connection with a larger targeted examination of options practices FINRA initiated in August 2021.
FINRA reminded firms that options sales are subject to the requirements of FINRA Rule 2360 ("Options") and Regulation Best Interest. FINRA posed questions to help firms determine whether their supervisory controls for options sales need improvement. The questions cover (i) a firm's process for approving/denying options trading, (ii) options disclosures and (iii) how a firm supervises options trading.
FINRA included a list of additional resources that firms can use to improve supervisory programs.
Commentary
Any firm offering options trading to individual customers must review the FINRA guidance closely and consider the extent to which it should revise its procedures in order to meet the standards that FINRA suggests are applicable. It is unlikely that many firms would have procedures that would meet all of these suggested standards.