There are industry press reports that the U.S. National Futures Association (NFA) is for the first time conducting on-site compliance examinations of NFA Hong Kong-based members which are registered with the Commodity Futures Trading Commission (CFTC). This only applies to firms that are registered with the CFTC, not those that have filed an exemption.
NFA members are required to comply with NFA Rules and CFTC Regulations. In order to monitor compliance, the NFA conducts periodic examinations. While all NFA members are subject to being examined, the timing and frequency of examinations vary depending upon:
- The amount of money the firm has under management;
- Customer complaints;
- Prior examination findings; or
- Concerns noted during the review of disclosure documents or financial statements filed with the NFA.
According to the NFA website, NFA examinations are conducted in three phases:
Planning: The NFA may contact the member firm to announce an upcoming examination. Following any initial contact, a formal announcement, known as a First Day Letter, will also be sent.
Fieldwork: During this phase, you can expect the NFA to:
- Interview key personnel;
- Review reports and documentation;
- Monitor firm operations; and
- Conduct an exit interview.
Reporting: Following fieldwork, the NFA will
- Hold an examination closing meeting to discuss findings; and
- Issue a written examination report.