Dan Jamieson over at Investment News put together a great article on branch office oversight earlier this week (and I'd say that even if I wasn't heavily quoted in the article). Dan highlights an issues of importance now to broker-dealers, especially ones that operate under the independent model, instead of the traditional branch office model. Supervision of remote branch offices is under the microscope of regulators, and wise firms should be especially vigilant to ensure that they have an adequate system of supervision in place, whether they operate with traditional branch offices or independent ones.
As I mentioned in the article, most brokers who engage in fraud (or in other violations for that matter), don't willingly disclose it to their firms on outside business activity reports or via other means. This means that firms can't simply rely on the representations of their brokers. Those that do might very well be found to have had an inadequate and unreasonable system of supervision should something go wrong, and could face some significant penalties from the regulators. Compliance and supervisory folks should understand that every examination that FINRA does of a registered rep.'s conduct is going to include a review of supervision to some extent.
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