Posted by Mike Prokop, Director, Deloitte & Touche LLP
On October 2, 2014, two representatives of the National Futures Association (NFA) — an independent self-regulatory organization for the futures industry — co-led a discussion on that body’s examination approach as part of Deloitte’s Dodd-Frank Compliance Leadership Academy.
Dale Spoljaric, managing director of NFA’s Compliance section, and Michael Brosius, director in NFA’s OTC Derivatives section, pointed out that the NFA has substantial authority. In addition to communicating information about violations to the CFTC, it can also bar an NFA member from doing business with other member firms, discipline members that violate its rules, and facilitate arbitrations between its members. In conducting examinations, the NFA can look at any activity covered by CFTC regulations.
In carrying out these functions, the NFA has identified some of the challenges that introducing brokers (IBs) face. They include implementing compliance programs that address recording, record-keeping, commissions receivable, and anti-money laundering/know-your-customer (AML/KYC) rules. Customer identification for onboarding clients has been an issue in the energy field, the two noted, adding that the NFA has proposed rule changes to address it.
Participants in the discussion asked Spoljaric and Brosius about several current issues in the futures industry.
The NFA has found its examinations to be more localized than expected, Brosius said. Because of that, examinations in certain rulemaking areas — especially business conduct standards — remain a challenge.