National Futures Association. Agenda Introduction to NFA Compliance Department Responsibilities and...
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Transcript of National Futures Association. Agenda Introduction to NFA Compliance Department Responsibilities and...
National Futures AssociationNational Futures Association
AgendaAgenda
Introduction to NFA Compliance Department Responsibilities
and Enforcement Activities
www.nfa.futures.org
FOR MORE INFO...
What is NFA?What is NFA?
A Congressionally authorized self-regulatory organization for the United States Futures Industry
NFA is a membership organization
NFA’s Core ValuesNFA’s Core Values
Highest level of service for our customers. Teamwork, competence, integrity, trust,
respect and cultural diversity. Continuous learning opportunities. Recognition of team and individual
achievements. Open communication. Active participation by all employees in
fulfilling our mission.
NFA’s HistoryNFA’s History
NFA was formed in 1976 and commenced operations in 1982.
The Commodity Futures Trading Commission (“CFTC”) oversees NFA’s activities and has delegated more and more responsibilities to NFA throughout NFA’s history.
NFA’s Four Primary Functions NFA’s Four Primary Functions
Registration
Arbitration
Education
Compliance
NFA Membership CountNFA Membership Count
3,990 Member Firms*
47,600 Associate Members (individuals)
*approximate number as of March 31, 2000
NFA EmployeesNFA Employees
Total number of employees: 305*
Headquartered in Chicago and a regional office in New York (Compliance employees only)
*approximate number as of July 15, 2000
Compliance ResponsibilitiesCompliance Responsibilities
Audit of Members to ensure compliance with
NFA/CFTC Rules
Financial Analysis/Surveillance
Investigations
Disclosure Document Review
Advertising Regulation Surveillance
Enforcement/Disciplinary Action
Electronic Market Surveillance
Compliance Department StructureCompliance Department Structure
Staff Auditors(0-2 years)
Field Supervisors(2-5 years)
Team M anagers(5+ years)
Associate Director
Director of Com pliance
New Staff TrainingNew Staff Training
3 permanent trainers on staff2 structured in-house training
programs1 on 1 training in the fieldOn going training classes
Staff Auditor ResponsibilitiesStaff Auditor Responsibilities
Audits Financial Analysis Phone Duty Investigations Recruiting
More on NFA’s ResponsibilitiesMore on NFA’s Responsibilities
AuditsAudits
NFA’s Audit ObjectivesNFA’s Audit Objectives
To determine whether a firm is maintaining records in accordance with NFA Rules.
To ascertain that each firm is operating in a professional manner.
To ensure customers are protected from unscrupulous activities, including misleading and high pressure sales practices.
To ensure proper maintenance of financial requirements.
Frequency of NFA AuditsFrequency of NFA Audits
All NFA Member firms are subject to being audited.
Based on routine cycles, judgement, and computerized priority system.
NFA Members holding customer funds are audited annually.
NFA goal is to ensure that all active Members are audited within three years..
Frequency of NFA AuditsFrequency of NFA Audits
Other factors that may prompt an audit:– Amount of funds under management– NFA’s monitoring of media advertising
and disclosure documents– Receipt of customer complaints– Potential effects of market movements– Referrals from outside NFA
At the completion of an audit:At the completion of an audit:
NFA auditors conduct an exit interview with firm personnel.
Firm receives an audit report of findings.
Determination made regarding disciplinary action based on seriousness of findings.
More on NFA’s ResponsibilitiesMore on NFA’s Responsibilities
Financial AnalysisFinancial Analysis
NFA’s Financial Analysis Objectives:NFA’s Financial Analysis Objectives:
To ensure that each firm is in compliance
with its minimum net capital requirement.
To review for proper accounting of
customer funds (including commodity
pools).
Review Consists of:Review Consists of:
Classification of assetsUnusual fluctuations in balances from
prior submissionReview of footnotes for unusual
explanations and required disclosuresDaily review of fluctuations in customer
funds to determine market exposure and effect on capital requirements
More on NFA’s ResponsibilitiesMore on NFA’s Responsibilities
InvestigationsInvestigations
NFA’s Investigation ObjectivesNFA’s Investigation Objectives
To analyze and resolve allegations of
potential violations of NFA Requirements
from a variety of sources.
To determine if pattern of misconduct by a
firm or broker exists which would warrant
further investigation of the firm’s
activities.
Sources of information for Sources of information for Investigative Matters:Investigative Matters:
Oral or written complaints from customers about a firm’s or broker’s conduct
Registration forms indicating that an individual was terminated involuntarily
Promotional material that is submitted for pre-view or is required to be submitted
Other governmental and regulatory agencies
Investigative Steps:Investigative Steps:
Based on type of allegations, conduct customer interview, analyze account documents, activity statements, etc.
Contact firm for additional information. Determine disposition based on findings:
– Close with no action.
– Forward to appropriate agency.
– Initiate audit.
– Issue “staff letter”.
– Recommend formal disciplinary action.
More on NFA’s ResponsibilitiesMore on NFA’s Responsibilities
Disciplinary ProcessDisciplinary Process
Disciplinary Matters Result From:Disciplinary Matters Result From:
Audits Promotional material review Investigative matters Financial analysis
Range of penalties Range of penalties (whether settled or adjudicated by Hearing Panel)(whether settled or adjudicated by Hearing Panel)
Expulsion or suspension. Bar or suspension for specified period from
association with NFA Member. Censure or reprimand. Monetary fine, not to exceed $250,000 per
violation. Order to cease and desist. Other penalty or remedial action (e.g. pre-view
and approval of promotional material or taping of sales solicitations, etc.)
More on NFA’s ResponsibilitiesMore on NFA’s Responsibilities
RecruitingRecruiting
More on NFA’s ResponsibilitiesMore on NFA’s Responsibilities
Newest Endeavor:
Market Surveillance
Market SurveillanceMarket Surveillance
Monitoring the Electronic Exchange Market– Corners– Squeezes– Manipulations
Monitor Large Market Participants Effect on the Market– Positions– Deliveries– Exchange for Physicals
Trade Practice SurveillanceTrade Practice Surveillance
Reviewing Exchange’s Daily Transaction Log
Reviewing the Exchange’s Trading Standards
National Futures AssociationNational Futures Association
Interested in joining our team??
What we are looking for.What we are looking for.
Motivated individuals that are flexible and work well in a team setting.
Individuals that have an interest in financial markets.
Accounting and Finance majors that meet GPA and classwork requirements.
Benefits of NFABenefits of NFA
Young environmentExcellent benefits--401(k), health,
dentalFlex timeTravelCompetitive salary
Questions???Questions???