New supervisory control requirements for
branch and remote ofﬁces
Amy N. Kroll and Anders W. Franzon
Purpose – To provide an overview of the new uniform deﬁnition of ‘‘branch ofﬁce’’ and to discuss how
that deﬁnition will inﬂuence broker-dealer supervisory programs.
Design/methodology/approach – Discusses the new deﬁnition of ‘‘branch ofﬁce’’, describes new
NASD and New York Stock Exchange supervisory control system requirements and supervisory
requirements for branch ofﬁces and other locations, and suggests guidelines for developing a branch
ofﬁce or remote ofﬁce supervisory program.
Findings – In the current regulatory environment, no broker-dealer should overlook regular and rigorous
attention to supervision of branch ofﬁces and other remote locations. And in light of the new deﬁnition of
a branch ofﬁce, each broker-dealer must include in its review and analysis a close evaluation of how the
broker-dealer supervises every location where broker-dealer personnel engage in activities on behalf of
the broker-dealer and must document that evaluation.
Originality/value – Important reference for broker-dealers’ branch ofﬁce supervisory programs that
underscores the need to pay proper attention to remote locations.
Keywords Control systems, Ofﬁce buildings, Supervisory programs, United States of America
Paper type General review
Regulatory changes in the past 18 months require that broker-dealers revisit, and to the
extent, necessary substantially enhance their supervisory systems to ensure compliance
with New York Stock Exchange (‘‘NYSE’’) and NASD (together ‘‘SROs’’) rules with regard to
supervisory and supervisory control systems. The new uniform deﬁnition of ‘‘branch ofﬁce’’
creates important new issues inﬂuencing many broker-dealer supervisory programs. In this
initial period, broker-dealers must evaluate many locations previously assumed not to be
branch ofﬁces to determine whether they are swept up by the new deﬁnition. Depending on
whether ofﬁces are or are not branch ofﬁces, broker-dealers will have to determine the
appropriate supervisory structure for each location. This article will provide an overview of
the new deﬁnition and supervisory rules and factors to consider in structuring supervision of
branch ofﬁces. This article also will discuss brieﬂy several related issues.
Background – applicable deﬁnitions and supervisory system requirements
Deﬁnition of ‘‘branch ofﬁce’’
For the ﬁrst time, a branch ofﬁce is uniformly deﬁned in NYSE and NASD rules as:
[A]ny location where one or more associated persons of a member or member organization
regularly conduct the business of effecting any transactions in, or inducing or attempting to
induce the purchase or sale of any security’’ or any location held out as such.
JOURNAL OF INVESTMENT COMPLIANCE
VOL. 6 NO. 3 2005, pp. 32-44, Q Emerald Group Publishing Limited, ISSN 1528-5812 DOI 10.1108/15285810510659301
Amy N. Kroll
Senior Counsel, and
Anders W. Franzon
(AFranzon@foley.com) is an
Associate, both at Foley &
Lardner LLP, Washington,