3012/3130 TESTING AND CERTIFICATION

Commencing December 2004 , FINRA Rule 3012 required its Members to not only conduct an annual review of the firm’s Written Supervisory Policies & Procedures Manual (“WSP”), but test the firm’s internal supervisory controls and systems against the WSP to ensure the WSP and its supervisory programs are up-to-date and meet regulatory scrutiny.

Rule 3012 further requires a Members designated principal to submit to the Member’s senior management, annually, a report detailing the Member’s system of supervisory controls and systems and summarizing the results of the WSP testing identifying all deficiencies and exceptions or amended supervisory procedures created in response to the audit test results.

FINRA Rule 3013 requires a Member’s Chief Executive Officer (“CEO”) to certify annually that the firm has in place processes to establish, maintain, review, test and modify the firm’s supervisory procedures manual to ensure the firm achieves compliance under the rules.

Given the critical nature of these requirements, Wall Street Consulting Services (“WSCS”)has created a comprehensive audit that rigorously reviews the various businesses and activities of the Member against the Firm’s WSP and its Supervisory controls and systems. A triangular 3 prong cross testing that ensures all deficiencies are identified so that proper updating to both the firm’s WSP and compliance supervisory systems can be achieved. Such testing includes, but is not limited to:

  • Comprehensive review of the Firm’s WSP
  • A matching and effectiveness testing of such WSPs against the firm’s controls, systems and business lines
  • Review of designated principals
  • Review of supervising producing managers subject to heightened supervision
  • Review of producing manager account activity
  • Review of customer account documents, to suitability and executed activity
  • Ensure that all products and businesses have a designated principal and are properly supervising all functionality of their scrutiny
  • Firm and rep CRD and BD filings
  • Ensure that cross multilayered approval and checks exist
  • Ensure any supervisory conflicts are identified and removed
  • Ensure that adequate tools, exception reports and supervisory systems exist to monitor all business and client activity
  • Ensure that Members aren’t delegating too much Compliance functionality to the business units as to make them self supervising
  • Review and ensure proper record keeping takes place
  • File the Small Firm Exemption if applicable
  • Identify all producing managers and potential conflicts of interest
  • Client suitability and activity review
  • Develop Heightened Supervisory Procedures for any producing managers
  • Develop the firm’s 302/3013 Audit Program
  • Firm needs analysis and continuing education program
  • Identity any WSP and supervisory system deficiencies as discovered via the firm’s testing
  • Provide supervisory solutions to meet regulatory scrutiny
  • Prepare WSP updates
  • Coordinate the CEO and Chief Compliance Officer 3012/3013 meeting
  • Prepare the CEO certification to be signed and brought before the firm’s board of Directors