NFA Highlights Member Exam Deficiencies, Provides Links to Resources

The NFA issued three notices covering regulatory obligations, recent amendments and rule interpretations for (i) FCM, FDM and IB Members (Notice I-24-03), (ii) CPO and CTA Members (Notice I-24-04) and (iii) Swap Dealer Members (Notice I-24-05).

For FCM, FDM and IB Members, NFA identified common deficiencies noted during NFA examinations, among them, failures: (i) to review the annual Self-Examination Questionnaire; (ii) to supervise and maintain all required communications and to identify brokers using unapproved and unrecorded communication methods; (iii) to provide cybersecurity training to employees; (v) to have at least one principal registered as an associated person; (vi) to file periodic financial reports and (vii) (for FCMs and IBS that are also SEC registered broker-dealers) to submit subordinated loan agreements ("SLAs") and corresponding amendments to the appropriate authority.

For CPO and CTA members, NFA identified common deficiencies noted during NFA examinations, among them, failures: (i) to review the annual Self-Examination Questionnaire; (ii) to comply with customer disclosure requirements related to digital assets or digital asset derivatives; (iii) adopt and implement a written supervisory framework over outsourced functions to mitigate outsourcing-related risks; (iv) (for CPOs) to file notice of claim for exemption prior to the offer or sale of participation in the exempt pool and compliance with other pool requirements; (v) to distribute an Annual Report, certified by an independent public accountant, to pool participants; (vi) (starting 1/1/24) to file a report with the FinCEN on beneficial ownership information and (vii) to compute financial ratios using the accrual method of accounting.

For Swap Dealers, NFA reminded members to, among other things, (i) make and keep records of all swap activity, including daily trading records and business records; (ii) obtain and retain a record of essential facts to accurately categorize their counterparties to facilitate compliance; (iii) maintain a supervisory program to diligently supervise all activities relating to their business; (iv) maintain regulatory capital as defined under the bank holding company regulations; (v) adequately monitor model performance and timely report material model performance issues and (vi) report swap transaction data to swap data repositories.