The Commodity Futures Trading Commission (CFTC) announced today that it has unanimously approved proposed amendments to its regulations to simplify obligations imposed on a self-regulatory organization (SRO) when carrying out its financial surveillance program for futures commission merchants (FCMs).
The proposed amendments to Regulation 1.52 revises certain minimum standards that an SRO must maintain in its financial surveillance program over FCMs to ensure their compliance with the CFTC rules and regulations as well as those of the SRO. The proposal is a result of the CFTC’s Project KISS initiative, which requested public input on simplifying and modernizing the agency’s regulations to make them less burdensome and costly, while maintaining their regulatory benefits. The comment period for the proposed amendments expires 60 days after the proposal’s publication in the Federal Register.
SROs are required by Regulation 1.52 to routinely conduct examinations of FCMs and their compliance with minimum capital, customer fund protection, recordkeeping, and reporting requirements. The proposal would revise certain standards, including the scope of a third-party expert’s evaluation of the SRO’s financial surveillance program to only encompass an assessment of the SRO’s FCM examination standards for consistency with auditing standards issued by the Public Company Accounting Oversight Board (PCAOB). The proposal also would require an SRO to promptly review and implement any material changes in the PCAOB auditing standards, as such standards would be applicable in the SRO’s examination of an FCM. Finally, the proposal also would require an SRO to engage a third-party expert to assess any material changes in its FCM examination standards resulting from the PCAOB revising or issuing new audit standards, provided that a third-party expert must be engaged no less frequently than once every five years.
