Key Takeaways
- Supervisors must monitor compliance with all applicable rules and regulations.
- Options-specific rules include OCC, CBOE, and FINRA requirements.
- Compliance reviews should be documented and conducted regularly.
- Violations must be reported and addressed promptly.
- Training on compliance requirements is an ongoing responsibility.
Last updated: January 2026
Compliance Monitoring
Effective compliance monitoring is essential to protect customers, the firm, and the industry. As a supervisor, you are the front line of compliance oversight.
Regulatory Framework for Options
Key Regulatory Bodies
| Regulator | Role |
|---|---|
| SEC | Federal oversight, rules enforcement |
| FINRA | SRO rules, broker-dealer supervision |
| OCC | Options Clearing Corporation rules |
| CBOE/Exchanges | Exchange-specific rules |
Key Rules for Options Supervision
| Rule | Focus |
|---|---|
| FINRA Rule 2360 | Options account supervision |
| FINRA Rule 3110 | Supervision requirements |
| OCC Rules | Clearing, exercise, settlement |
| Regulation T | Margin requirements |
Compliance Review Areas
Account-Level Compliance
| Area | Review Focus |
|---|---|
| Account documentation | Complete and current |
| Suitability | Trading appropriate for customer |
| Disclosures | ODD and agreements provided |
| Margin | Requirements met |
Transaction-Level Compliance
| Area | Review Focus |
|---|---|
| Order handling | Best execution requirements |
| Trade reporting | Accurate and timely |
| Position limits | Within allowed limits |
| Exercise limits | Within allowed limits |
Written Supervisory Procedures (WSPs)
Requirements
| Element | Description |
|---|---|
| Coverage | All aspects of options business |
| Specificity | Clear, detailed procedures |
| Accessibility | Available to all relevant personnel |
| Updates | Regular review and revision |
Key WSP Components for Options
| Component | Description |
|---|---|
| Account opening | Procedures for new options accounts |
| Suitability review | How suitability is assessed |
| Order supervision | Order entry and execution oversight |
| Exception handling | Response to flagged activity |
| Complaint procedures | Customer complaint handling |
Violation Handling
When Violations Are Identified
| Step | Action |
|---|---|
| Document | Record all details of violation |
| Assess | Determine severity and scope |
| Report | Notify compliance/management |
| Correct | Take remedial action |
| Prevent | Implement controls to prevent recurrence |
Severity Classification
| Level | Examples | Response |
|---|---|---|
| Minor | Documentation errors | Correct and document |
| Moderate | Procedural violations | Investigate, corrective action |
| Serious | Customer harm, rule violations | Full investigation, possible reporting |
| Severe | Fraud, manipulation | Immediate escalation, regulatory reporting |
Ongoing Monitoring Tools
Surveillance Systems
| Tool | Purpose |
|---|---|
| Exception reports | Flag unusual activity |
| Trade surveillance | Monitor for manipulation |
| Position reports | Track concentration and limits |
| Complaint tracking | Monitor customer issues |
Periodic Reviews
| Review | Frequency |
|---|---|
| Account review | At least annually |
| WSP review | Annual review and update |
| Training assessment | Ongoing |
| Regulatory updates | As rules change |
Test Your Knowledge
Which FINRA rule specifically addresses options account supervision?
A
B
C
D
Test Your Knowledge
Written Supervisory Procedures (WSPs) for options should be:
A
B
C
D