NIBA’s September 14 Conference opened up first thing in the morning with a panel discussion on none other than “What's on the radar at the NFA!” By the look on the faces of the crowed audience, the topics had many eyes wide open…more than your average cup of Latte can do in the morning. The panel, which was moderated by Robert DeMuria of Compliance Supervisors International, Inc., consisted of very reputable and qualified individuals: Joseph Mazza, CPA of Compliance Supervisors International, Inc.; Anibal Carlo, Manager of National Futures Association and Michael Coglianese, CPA of Michael Coglianese CPA, P.C.
The discussion kicked right off with NFA discussing many of the key areas they focus on in their examinations. Suffice it to say that for 45 minutes, the panel made it clear that ALL NFA Member firms need to adopt and enforce reasonable and sound internal controls around their day-to-day processes. Whether it is drafting procedures, compiling financial statements, or establishing customer accounts, all NFA Member firms must have the necessary internal controls to ensure they are complying with the rules and regulations that govern their operations. If you have gone through an NFA examination in the past 12 to 18 months, you probably encountered detailed questions surrounding competency levels of the staff, the separation of duties among staff with respect to financial controls, and why certain vendors were selected over others.
If you have not been through an NFA examination in the past 12 to 18 months, your firm needs to ensure it evaluates its overall operations, the processes in place and whether or not you have the right people in the right positions. No longer will you see NFA reports that cite exception based findings like “five out of 10 order tickets were not properly time stamped”. Now expect to see something like “NFA noted that order tickets were not properly time stamped all the time. NFA noted that (i) adequate supervisory procedures were not adopted; (ii) requirements were not communicated to staff in a timely manner; and (iii) associated persons did not receive the necessary training to ensure order tickets are completed properly”. NFA recognizes that internal controls for large firms can’t be replicated at small firms. Typically smaller firms need to outsource their accounting and compliance. The panel stressed that a firm’s selection of third party vendors should be evaluated properly and not just based on which vendor is the lowest cost. NFA stressed this is thoroughly looked at in NFA audits. With respect to larger firms with sufficient resources, NFA evaluates the number of employees versus supervising employees and whether or not there in an internal audit department and if not, they want to know who is responsible for monitoring and assessing the organization’s internal controls. Mr. Mazza and Mr. Coglianese provided some valuable insight on procedures they perform on a firm’s internal control infrastructure during their certified audits of IBs.
Plenty of notes were taken during the session and many follow-up up questions were asked after the session. Overall an excellent and well timed topic for the industry!
