10.1 OSJs, Branches, RSLs, and Inspection Cycles

Investment Company and Variable Contracts Products Principal Series 26

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1 Chapter 1: Registration of the Broker-Dealer and Its Associated Persons

1.1 Broker-Dealer Registration, FINRA Membership, and Firm Filings 1.2 Individual Registration: Forms U4 and U5, Registration Categories, and Exempt Persons 1.3 Pre-Hire Screening, Fingerprinting, and Statutory Disqualification 1.4 Heightened Supervision, Interim Plans, and the Taping Rule 1.5 Broker-Dealers, Investment Advisers, Dual Registrants, and Unregistered Entities

2 Chapter 2: Training, Continuing Education, and Product Knowledge

2.1 Continuing Education (Rule 1240), the Maintaining Qualifications Program, and the Annual Compliance Meeting 2.2 The Investment Company Act of 1940: Classifications, Registration, and Fund Governance 2.3 Mutual Fund Pricing, Redemption, Exchanges, Sales Charges, and Share Classes 2.4 Variable Annuities and Variable Life Insurance: Structure, Charges, and Rule 2320 2.5 Closed-End and Interval Funds, UITs, Money Market Funds, 529 Plans, and Investment Risks

3 Chapter 3: Supervisory System, Conduct Standards, Insider Trading, and Discipline

3.1 The Supervisory System, Written Supervisory Procedures, and Standards of Conduct 3.2 Insider Trading, Information Barriers, and Personal Trading Supervision 3.3 FINRA Investigations, Disciplinary Proceedings, Sanctions, and Exemptions

4 Chapter 4: Communications with the Public

4.1 Communications Categories, Principal Approval, Filing, and Recordkeeping (Rule 2210) 4.2 Content Standards, Investment Company Advertising, and Professional Designations 4.3 Variable Contract Communications, Fund Rankings, Bond Fund Volatility Ratings, and Investment Analysis Tools 4.4 Correspondence and Internal Communications, Social Media, Public Appearances, and Telemarketing

5 Chapter 5: Recommendations, Customer Accounts, and Product Sales Supervision

5.1 Regulation Best Interest, Conflicts, and Form CRS 5.2 Know Your Customer, FINRA Suitability, and Institutional Accounts 5.3 New Accounts, Customer Authority, Discretion, and Order Handling 5.4 Mutual Fund Breakpoints, Share Classes, and Switching Supervision 5.5 Deferred Variable Annuities and the Seven-Business-Day Principal Review 5.6 Prospectuses, Summary Prospectuses, SAIs, and Ongoing Disclosures

6 Chapter 6: Compensation, Outside Activities, and Personal Conduct

6.1 Cash Compensation, Distribution Arrangements, and Conflicts 6.2 Gifts, Gratuities, and Business Entertainment (Rule 3220) 6.3 Training Meetings, Sales Contests, and Non-Cash Compensation 6.4 Referral Payments, Bank Networking, and Unregistered Persons 6.5 Outside Business Activities, Private Securities Transactions, and Rule 3290 Transition 6.6 Outside Accounts, Borrowing and Lending, Account Sharing, and Guarantees

7 Chapter 7: Customer Account Operations, Transfers, and Privacy

7.1 Account Records, Trusted Contacts, Confirmations, and Statements 7.2 Cash Accounts, T+1 Settlement, Regulation T, Extensions, and Freeriding 7.3 ACATS Transfers, Transfer-on-Death Accounts, and Account Changes 7.4 Regulation S-P, Incident Response, Service Providers, and Identity Theft

8 Chapter 8: Anti-Money Laundering, Customer Identification, and Sanctions

8.1 AML Program, Independent Testing, Training, and Governance 8.2 Customer Identification, Due Diligence, and Beneficial Ownership 8.3 SARs, CTRs, OFAC, Information Sharing, and AML Red Flags

9 Chapter 9: Supervisory Controls, Business Continuity, and Regulatory Reporting

9.1 Supervisory Controls, Annual Testing, and CEO Certification 9.2 Business Continuity, Systems Resilience, Cybersecurity, and Vendors 9.3 Rule 4530, FOCUS and Annual Reports, and Customer-Asset Events

10 Chapter 10: Office Classifications, Inspections, and Records

10.1 OSJs, Branches, RSLs, and Inspection Cycles 10.2 Inspection Reports, Independent Review, Signage, and Office Files 10.3 Broker-Dealer Books and Records, Electronic Storage, and Correspondence

11 Chapter 11: Complaints, Arbitration, Mediation, and Expungement

11.1 Customer Complaints, Investigation, Retention, and Reporting 11.2 Predispute Agreements, Arbitration Codes, Eligibility, Panels, and Awards 11.3 Mediation and Customer-Dispute Expungement

12 Chapter 12: Financial Responsibility, Membership Changes, and Investor Protection

12.1 Net Capital, Minimum Tiers, Haircuts, and Early Warning 12.2 Customer Protection, Possession or Control, Reserve Formula, and Exemptions 12.3 New-Product Review and Continuing Membership Applications 12.4 SIPC, Fidelity Bonds, Proxy Materials, and Financial Reports

10.1 OSJs, Branches, RSLs, and Inspection Cycles

Key Takeaways Explain This Topic AI

An OSJ is a location conducting one or more of the seven supervisory or operational functions listed in Rule 3110(f); every OSJ is a branch, but not every branch is an OSJ.

OSJs and branches supervising non-branch locations are inspected annually; non-supervisory branches at least every three years; non-branch locations on a documented risk-based schedule.

Rule 3110.19 permits an eligible private residence to be designated a Residential Supervisory Location and treated as a non-branch location when all conditions are met.

Rule 3110.18 is a voluntary three-year remote-inspection pilot effective July 1, 2024; remote method does not change office classification or inspection frequency.

Last updated: September 2026

OSJ and Branch Classification

Under Rule 3110(f), an office of supervisory jurisdiction (OSJ) is an office at which one or more specified functions occurs, including order execution or market making; structuring public offerings or private placements; maintaining custody of customer funds or securities; final acceptance of new accounts; review and endorsement of customer orders; final approval of retail communications; or supervision of associated persons at another branch. Classification follows actual activity, not the firm's label.

A branch office is generally a location identified to the public or from which an associated person regularly conducts securities business, subject to listed exclusions and conditions. Every OSJ is a branch office, but a sales office without OSJ functions can be a non-supervisory branch. A location supervising persons at non-branch locations is also treated as a supervisory branch under the rule.

Inspection Cycles

• Location Rule 3110 inspection cycle
• OSJ At least annually on a calendar-year basis
• Branch supervising one or more non-branch locations At least annually
• Non-supervisory branch At least every three years, more often when risk requires

Non-branch location Regular periodic schedule based on activities and customer contact; a cycle longer than three years requires documented support

The general presumption is that a non-branch location is inspected at least every three years. Red flags, disciplinary history, production, product mix, outside activities, complaints, turnover or a remote workforce can justify a shorter cycle. The firm records each inspection date and explains its schedule in the procedures.

Residential Supervisory Locations

Effective June 1, 2024, Rule 3110.19 permits an eligible private residence where supervisory activity occurs to be designated a Residential Supervisory Location (RSL) and treated as a non-branch location. The firm and associated person must satisfy detailed eligibility and conditions. Among other limits, the location cannot hold itself out as an office, meet customers there, handle customer funds or securities, maintain required original records there, or conduct prohibited activities; the associated person must be assigned to a registered branch or OSJ and the firm's systems must support supervision.

The firm identifies RSL status through the Form U4 RSL question and maintains the required records and risk assessment. An RSL remains subject to inspection as a non-branch location. "Residential" does not mean unreported, and the designation does not convert an ineligible home office into a compliant location.

Remote Inspection Pilot

Rule 3110.18 established a voluntary three-year Remote Inspections Pilot Program , effective July 1, 2024. An eligible participating firm may use remote means for some or all eligible office inspections if it satisfies the rule's risk assessment, procedures, data submission, recordkeeping and exclusion requirements. Certain firms, offices and locations are ineligible based on disciplinary, regulatory, business or location-specific conditions.

Remote inspection changes method , not frequency, scope, classification or the duty to detect problems. A risk assessment may require an on-site visit. Video, document upload and system access can miss unreported persons, signage, paper records or customer checks, so exception indicators should drive physical follow-up.

Classification Review

At least annually and when duties change, the principal should compare Form U4 and Form BR data, leases, websites, business cards, phone listings, supervision charts, system logins and customer meeting records. Final approval authority or supervision exercised from a location can change its status even if no sign is posted. Correct classification should be followed by amendments, inspections and remediation rather than backdated paperwork.

Home-Office Scenarios

A representative who only performs clerical work from home under an exclusion is different from a principal who approves accounts or communications there. Supervisory authority can make the residence a branch or OSJ unless the RSL rule is available and every condition is satisfied. Customer meetings at the home, public advertising of the address, storage of customer checks or required originals, and associated outside businesses can defeat RSL treatment.

The firm should use system and communication data to locate unreported work sites. Repeated logins, outgoing mail, website addresses and expense reports may show that securities business occurs where Form U4 and Form BR do not. The response includes classification, amendment, inspection, customer-risk review and assessment of why the supervisory system missed the location.

Office inventories should reconcile people to locations and locations to responsible supervisors. Orphaned locations, supervisors assigned to impossible spans of control and registrations with no current inspection date are indicators that the classification process is not operating.