General Securities Sales Supervisor Exam
The Series 9/10 exam qualifies individuals to supervise general securities sales activities at a FINRA member firm. It is a two-part exam: the Series 9 covers options supervision, while the Series 10 covers general sales supervision, regulatory compliance, and trading operations oversight. This is the broadest principal-level supervisory qualification, required for sales managers and supervisors who oversee registered representatives. Candidates must have passed the SIE and Series 7 exams and be sponsored by a FINRA member firm.
Topic Weight Distribution
Content Outline
Subtopics
Key Concepts
Before approving a customer for options trading, the supervisor must evaluate multiple factors to determine suitability. These include the customer's investment objectives, financial situation (income, net worth, liquid net worth), investment experience (particularly with options and derivatives), tax status, and age.
Options strategies are tiered by risk level. Covered strategies (such as covered calls) are suitable for conservative investors seeking income. Buying options requires moderate risk tolerance since the maximum loss is limited to the premium paid. Uncovered writing requires the highest risk tolerance and financial resources because of potentially unlimited losses. The supervisor must ensure each customer is approved only for strategies matching their profile.
All options-related communications -- including retail communications, correspondence, and institutional communications -- must be supervised by a Registered Options Principal (ROP). Retail communications about options must be approved before first use and filed with FINRA within 10 calendar days of first use.
Options communications must present a balanced picture of both risks and rewards. They must not contain projections, predictions, or guarantees of specific results. Any discussion of options strategies must include a description of the risks involved. The ODD must be referenced in or accompany any retail communication about options. Supervisors are responsible for maintaining records of all approved communications.
Subtopics
Key Concepts
Regulation Best Interest (Reg BI) requires broker-dealers and their associated persons to act in the best interest of retail customers when making securities recommendations. It goes beyond the traditional suitability standard by requiring firms to address conflicts of interest and not place their financial interests ahead of the customer's interests.
Reg BI has four component obligations: the Disclosure Obligation (provide Form CRS and disclose material facts), the Care Obligation (exercise reasonable diligence and skill in recommendations), the Conflict of Interest Obligation (establish policies to identify and mitigate conflicts), and the Compliance Obligation (establish and enforce written policies and procedures). Supervisors must ensure all representatives comply with each obligation.
FINRA categorizes communications into three types, each with different supervisory requirements. Retail communications are any written or electronic communications distributed to more than 25 retail investors within a 30-day period. These require principal approval before first use.
Correspondence is any written or electronic communication distributed to 25 or fewer retail investors within a 30-day period. Firms must supervise correspondence but may use post-use review and sampling methods. Institutional communications are distributed exclusively to institutional investors and require review procedures but not necessarily pre-use approval. Supervisors must maintain written procedures for reviewing all three categories.
Subtopics
Key Concepts
Every FINRA member firm must establish, maintain, and enforce Written Supervisory Procedures (WSPs) that are reasonably designed to achieve compliance with applicable securities laws and regulations. WSPs must be tailored to the firm's specific business activities and updated as rules change.
WSPs must designate a supervisory principal for each type of business activity, describe the supervisory system (including how reviews will be conducted and documented), and outline procedures for handling customer complaints, reviewing correspondence, and conducting annual branch office inspections. The chief compliance officer must review the WSPs annually and certify their adequacy. Failure to maintain adequate WSPs is one of the most common FINRA enforcement findings.
Under the Bank Secrecy Act (BSA), every broker-dealer must establish an AML compliance program that includes: written internal policies, procedures, and controls; a designated AML compliance officer; an ongoing employee training program; and an independent testing function.
Key AML obligations include the Customer Identification Program (CIP) for verifying customer identity at account opening, Customer Due Diligence (CDD) for understanding the nature and purpose of customer relationships, and filing Suspicious Activity Reports (SARs) for transactions that may involve money laundering or other illegal activity. Supervisors must also ensure OFAC screening to prevent transactions with sanctioned persons or entities.
Subtopics
Key Concepts
FINRA Rule 5310 requires broker-dealers to use reasonable diligence to obtain the most favorable terms for customer orders. This is known as the best execution obligation. Firms must consider factors including the size and type of transaction, the number of markets checked, the accessibility of quotations, and the terms and conditions of the order.
Supervisors must conduct a regular and rigorous review of execution quality, at least quarterly, assessing whether order routing decisions are in the best interest of customers. This includes evaluating the execution quality provided by each market center to which orders are routed, considering price improvement, fill rates, and speed of execution. Payment for order flow arrangements must not compromise the duty of best execution.
Supervisors must oversee margin account activity to ensure compliance with Regulation T (initial margin of 50%), FINRA maintenance margin requirements (minimum 25% equity), and the firm's own house margin requirements. Pattern day traders are subject to enhanced requirements under FINRA Rule 4210, including a minimum equity of $25,000.
Key supervisory responsibilities include monitoring margin call issuance and resolution, ensuring accounts are not permitted to operate on an under-margined basis, reviewing concentrated positions that may pose heightened risk, and overseeing the liquidation process when customers fail to meet margin calls. Supervisors must also ensure that margin disclosures are properly delivered to customers at account opening.
Study Tips for the Series 9/10 Exam
- Prepare for two separate exams. The Series 9 and Series 10 are taken separately with distinct passing scores. You can pass one and retake the other if needed. Plan your study schedule accordingly.
- Study options deeply for the Series 9. The Series 9 is entirely focused on options supervision. Master account approval, suitability, OCC rules, margin calculations, and options communications before sitting for this part.
- Know your FINRA rules. The Series 10 heavily tests supervisory rules including WSPs, branch inspection requirements, complaint handling, communications review, and AML obligations. Learn the specific rule numbers and requirements.
- Think like a supervisor, not a representative. Questions are framed from a supervisory perspective. Focus on what you would approve, how you would review, and what procedures you would implement -- not how to execute trades.
- Master Reg BI and suitability. Regulation Best Interest is a critical topic. Understand all four component obligations and how they apply to different types of recommendations and customer interactions.
- Practice scenario-based questions. The Series 9/10 is heavily scenario-based. You will be presented with supervisory situations and asked to identify the correct course of action. Practice applying rules to realistic situations.
Practice Questions
Test your knowledge with these Series 9/10-style questions. Click an answer to check if you are correct.
1. Which of the following communications categories requires principal approval BEFORE first use?
Correct: B. Retail communications (distributed to more than 25 retail investors within 30 days) require principal approval before first use. Correspondence and institutional communications require supervision but may use post-use review methods.
2. Under Regulation Best Interest, which of the following is NOT one of the four component obligations?
Correct: C. Reg BI's four component obligations are the Disclosure Obligation, Care Obligation, Conflict of Interest Obligation, and Compliance Obligation. While Reg BI raises the standard above traditional suitability, it does not impose a fiduciary duty -- that applies to investment advisers under the Investment Advisers Act of 1940.
3. How often must a firm conduct branch office inspections?
Correct: C. FINRA requires each branch office to be inspected at least annually. Non-branch office locations (OSJs and non-OSJ locations) may have different inspection cycles based on a risk-based assessment, but branch offices require annual inspections at minimum.
4. A pattern day trader must maintain minimum equity of:
Correct: C. Under FINRA Rule 4210, a pattern day trader (one who executes four or more day trades within five business days) must maintain minimum equity of $25,000 in their margin account. If equity falls below this level, the account is restricted from day trading until the minimum is restored.
5. Which of the following is a required component of a firm's AML compliance program?
Correct: C. The BSA requires every firm's AML program to include four components: written internal policies and procedures, a designated AML compliance officer, an ongoing employee training program, and independent testing of the program. The testing can be performed by internal audit or an external party, but must be independent of the AML compliance function.
Related Exams
These exams are commonly pursued alongside or in addition to the Series 9/10.
General Securities Representative
A prerequisite for the Series 9/10. The Series 7 qualifies you to sell a broad range of securities products and is the foundation for most supervisory registrations.
Registered Options Principal
A more focused options supervisory qualification. If your role is limited to options oversight, the Series 4 may be sufficient instead of the broader Series 9/10.