What is the difference between a branch office and an OSJ?

The difference between a branch and an OSJ is significant. An office of supervisory jurisdiction or OSJ is empowered to engage in any business activity the member firm is authorized to perform. This includes market making, investment banking and approval of retail communications. A member firm must inform FINRA which offices it has identified as being an office of supervisory jurisdiction (OSJ). An OSJ is any office that conducts one or more of the following activities at that location:

• Has custody of customer funds or securities.
• Has final approval for retail communications.
• Has final approval of customer accounts.
• Reviews and approves customer orders.
• Executes orders or makes markets in securities.
• Forms or structures offerings.
• Supervises employees at other branch offices.

At least one resident principal must manage the OSJ. The resident principal must enforce the policies and procedures of the firm, review all customer activity, and inspect the branch offices within his or her jurisdiction. Each OSJ should have one resident onsite principal who is assigned to the office and who maintains a consistent physical presence at the office. FINRA’s guidelines assume that each principal will have supervisory reasonability for only one OSJ. However, if a member’s business requires it to assign the supervisory responsibilities for more than one OSJ to a principal, the member must document the supervisory arrangement in its written supervisory procedures manual. FINRA would not be required to approve the arrangement but the member should give special consideration to the experience level of the principal, the geographic location of the offices, the number of representatives and if the principal is a producing agent. An office that solely has final approval over the issuance of research reports need not be classified as an OSJ so long as it does not engage in the activities of an OSJ detailed above.

A branch office is any location that is identified to the public as being a place where the member conducts business but does not engage in any of the activities that would require it to be considered an OSJ. Branch offices are inspected by an OSJ. A branch office may operate without a resident principal. A registered representative may act as the branch manager. The supervisory responsibility is with the OSJ.