9020 - COMPLIANCE RULES 2-9, 2-36 AND 2-39: SELF-AUDIT QUESTIONNAIRES
(Board of Directors, October 6, 1992; revised July 24, 2000 and April 8, 2011)
NFA Compliance Rule 2-9 places a continuing responsibility on every Member to diligently supervise its employees and agents in all aspects of their futures activities, while Compliance Rule 2-36 (and Compliance Rule 2-39 by reference to Compliance Rule 2-36) imposes the same requirements on Members with respect to their forex related activities. NFA recognizes that, given the differences in the size and complexity of the operations of NFA Members, there must be some degree of flexibility in determining what constitutes "diligent supervision" for each firm. It is NFA's policy to leave the exact form of supervision to the Member, thereby providing the Member with flexibility to design procedures that are tailored to the Member's own situation. The Board of Directors adheres to this principle but feels that all Members should regularly review the adequacy of their supervisory procedures.
The Board of Directors has determined that in order to satisfy their continuing supervisory responsibilities, NFA Members must review on a yearly basis self-audit questionnaires that can be downloaded from NFA's web site at www.nfa.futures.org. All Members must review the general questionnaire and one or more of the applicable supplemental questionnaires (e.g., FCM, FDM, IB, CPO or CTA). The questionnaires must be reviewed by the appropriate supervisory personnel in the home and branch office, if applicable. After reviewing the questionnaire, an appropriate supervisory person must sign the questionnaire stating that the Member's operations have been evaluated based on the questionnaire and attesting that the Member's procedures comply with all applicable NFA requirements.
Members are required to retain the signed questionnaire in their files for a period of five years from the date of review, with the questionnaires being readily accessible during the first two years. In addition, guaranteed IBs must provide and FCMs and FDMs that guarantee any IBs must obtain copies of the signed questionnaires. Members must also provide the signed questionnaires for inspection upon request by NFA.
Review of the questionnaires should aid Members in recognizing potential problem areas and alert them to procedures which need to be revised or strengthened. The questionnaires focus on a Member's regulatory responsibilities and require a review of the adequacy of the Member's internal procedures. For example, the FCM questionnaire requires review of a Member's procedures relating to customer order flow, customer account documentation, risk disclosure, margin policies, option accounts and transactions, customer complaints, advertising, and compliance with other NFA requirements. Similarly, the CPO/CTA questionnaires contain questions that will assist CPOs and CTAs in their review of disclosure documents.
A Member firm that does not comply with this Interpretive Notice will violate NFA Compliance Rule 2-9, 2-36, or 2-39, as applicable.
Questions regarding this Interpretation or the questionnaires should be directed to the Compliance Department at (800) 621-3570 or through the "contact" feature of NFA's web site.