A broker-dealer firm has established a policy that all customer complaints, whether written or verbal, must be logged, investigated, and resolved within 30 business days. This policy also requires a designated supervisor to review all complaint resolutions. This firm's policy is primarily designed to address which regulatory obligation?
- AThe requirement for agent registration.
- BThe obligation to maintain adequate capital.
- CThe duty of best execution.
- DSupervisory procedures for handling customer complaints.
Show answer & explanationAnswer & explanation
Correct answer: D. Supervisory procedures for handling customer complaints.
Broker-dealers are required by regulators to establish and maintain written supervisory procedures, including specific protocols for handling customer complaints. This ensures that complaints are addressed promptly, fairly, and systematically, protecting both the client and the firm.
Why the other options are wrong
- A. Agent registration is a prerequisite for individuals to sell securities, not a procedure for handling complaints.
- B. Adequate capital ensures financial solvency, unrelated to complaint handling procedures.
- C. Duty of best execution relates to trade execution quality, not complaint handling.
Customer Complaint Handling Procedures
Broker-dealers and Investment Advisers are required to establish and maintain written supervisory procedures for the prompt, fair, and systematic handling of customer complaints. This typically involves logging all complaints (written and verbal), investigating them, communicating with the client, and documenting the resolution.
- Applies to both BDs and IAs.
- Requires written supervisory procedures.
- Includes logging, investigation, and resolution.
- Aims for prompt, fair, and systematic handling of complaints.
Memory trick: Rules to Follow, Protection to Offer, Clients to Serve.