I was recently examined by NFA. It appeared like the examiner's exam plan "play book" that did not completely fit my business. Please describe how NFA's examination programs are structured. Specifically, are examination programs designed to review the unique aspects for the different registration types (i.e. FCMs, RFEDs, IBs, CTA and CPOs)?
Yes. NFA examination programs are designed to allow for focused examinations of the different registrant types. Additionally, NFA plans each exam so that it's tailored to the unique business operations and risks of the Member. No two Members' businesses are exactly alike – even Members within the same registration category. As a result, no two NFA examination plans are exactly alike. During examination planning and preparation, examiners try to learn as much about the Member and its business operations as possible so that the examination is designed to test areas of risk applicable to that particular firm.
The NFA examination program has many different modules that examine against regulatory requirements and best practices specific to each registration type. For example, NFA uses specially designed programs during an examination of a CTA or CPO to ensure performance rates of returns and disclosure documents are prepared in accordance with rules and regulations. Examination programs for FCMs, IBs and RFEDs are designed to test Members' financial statements and ensure segregation, capital and regulatory reporting compliance. NFA examination programs also consider the unique risks associated with other elements of a Member's business such as those for those for swap IBs and retail forex firms.
NFA views the examination as a process to support a firm's commitment to meet its regulatory obligations. Examiners try to minimize the disruption to the Member's operations; however, they must perform a certain amount of work at the Member's office, obtain representations from appropriate firm personnel and review firm documents. NFA has several resources available to advise and assist Members in preparing for an NFA examination; they can be found here: http://www.nfa.futures.org/NFA-compliance/NFA-general-compliance-issues/nfa-examinations.HTML.
