Proposed Rule
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Beginning in January 2002, NFA required Independent Introducing Brokers ("IBIs") to file their unaudited financial statements electronically. To implement electronic filing, NFA provided to the IBIs the Winjammer(TM) software, a client-server system that must be installed on a Member firm's computer. For the reasons explained below, NFA Compliance and Information System staff have now developed a Web-based application called EasyFile to replace Winjammer(TM). Although the current proposal applies to IBI statements only, we designed EasyFile with electronic filing of other financials statements in mind. For example, background work has already commenced to include certified commodity pool financial statements in the EasyFile system and we intend to also add Form 1-FR FCMs and FOCUS reports in the future.
Winjammer(TM) has been difficult for IBI Members to implement and maintain for a number of reasons. The Member must install the Winjammer(TM) software on a compatible computer system. Not only have some IBIs had difficulty installing the software, some firms have had to replace their systems with compatible systems. Many IBI Members have also had difficulty using the software, which requires them to enter the data and then email the information to NFA where the data is then uploaded to NFA's database. Because IBIs only file unaudited statements semi-annually (except for IBIs that file FOCUS reports more frequently), Members routinely forget how to use the system. These issues have not only impacted IBIs but also NFA staff due to the significant outlay of both Compliance Department and Information Systems Department resources to support the IBIs' use of Winjammer(TM).
EasyFile simplifies the process for IBs and reduces the need for NFA staff resources devoted to supporting the Winjammer(TM) software. Because Members will use EasyFile to enter the data directly into NFA's database by visiting our Web site, EasyFile eliminates the necessity for separate software installation and emailing the data to NFA for uploading. To use Winjammer(TM) the firm obtained a PIN number from NFA. Because EasyFile uses the same security architecture as NFA's Online Registration System ("ORS"), an EasyFile user can access EasyFile using the same userID and password that is used to access ORS, which is particularly beneficial to small firms with one or two users who perform multiple tasks. The separate Winjammer(TM) PIN number will no longer be needed. EasyFile also provides additional assistance to Members, many of which are small firms that cannot afford to hire professional accounting staff or outsource this function. For example, not only have we designed EasyFile to have a look and feel that is familiar to Members, but we have also provided Help pages and other assistance as Members work through the form and complete the 1-FR-IB.
Accessing and Using EasyFile
To protect the integrity of the data, only authorized persons will have the ability to access EasyFile. These persons will be identified to the system and their identity will be authenticated to the extent possible before they gain access. In addition, they will be able to access only the data that they are authorized to access. Obtaining access to the Easy File system is a two-step process: first, establishing a security management account and creating a security manager for the IBI, and second, establishing the persons authorized to file the financial statements as users of the EasyFile system.
Firms will gain access authority by submitting an on-line enrollment form for a security management account ("SMA")1. The firm will provide its name, the name of the security manager ("SM") for the firm, the SM's address and the firm's NFA ID number, if it has one, and submit the request to NFA. Upon submission of the enrollment form, the system will display a temporary password for the SM to use to sign on the first time. If the firm is an existing registrant, upon NFA's approval of the enrollment, NFA will send a letter to the firm's registration contact listed in the firm's ORS records with the SM's userID. If the firm is a new applicant, NFA will send the letter to the address provided on the enrollment form. Once the firm has received the userID, the SM will access the system using the userID and the temporary password previously provided and will be prompted to change the password at that time.
The SM will then enter identifying information about any person whom the firm authorizes to file financial statements on its behalf. The SM will assign userIDs, passwords and security levels to each user. The SM's establishment of the person as an EasyFile user will constitute the firm's designation of the person as authorized to file statements on its behalf. Security levels include entering data into the statement and filing the statement. The users will enter their userID and password to gain access. The SM can add or remove users and change the security level for any of the firm's users. The users' identifying information is maintained in the system and is logically associated with their userIDs. Thus, each user will be known to NFA.
In general, a firm's users will only be able to access the IBI's own financial statements. Unless otherwise authorized to do so, no user will be able to view, enter or file the information of another firm. Only the persons permitted under CFTC Regulation 1.10(d)(4) may file the statements and the filing will constitute a representation by persons filing financial statements that they are persons who meet the requirements of CFTC Regulation 1.10(d)(4). The system will capture the userID of any person who accesses the system and logically associate that userID with any information that the person files or modifies or deletes after filing the statement. If a piece of existing information is modified or deleted, change records will be created identifying the changes made, and an audit record of that transaction containing the old information, the date it was changed and the identity of the person who changed it will be created and maintained in audit tables. NFA will be able to access these tables and will provide information from them on request as appropriate.
Oath or Affirmation
The submission of the financial statement to NFA will constitute the requisite oath or affirmation. By assigning the file security level to a user, the firm authorizes that user to make the oath or affirmation. The content of the oath or affirmation is specified in paragraph (b)(3) of the proposed rule. Each time before a user submits a financial statement, the oath or affirmation will appear and the text will advise the user that by submitting the statement, the user will be making the oath or affirmation.
In a paper environment, an individual's written signature is the formal means by which the user makes the required oath or affirmation. The security and filing process described above will be the electronic analog of the handwritten signature and will cause the user's userID to be logically associated with the information contained in the financial statement at the time of submission. The rules governing the system will provide that it is the responsibility of each user to maintain the confidentiality of the userID and password. The rules will also provide that the person whose userID and password is used to submit financial statements will be presumed to have performed that activity.
The Commission previously sanctioned the identical security and electronic filing process in 2002 when it approved NFA's rules implementing ORS. The filing of the electronic registration forms in ORS and the logical association of the userID with the information filed in ORS operates as an electronic substitute for the manual signature that had been required on hard copy registration forms.
Hard Copy Statements
It will be both convenient and necessary for users to be able to retrieve financial statements in hard-copy format. Firms, for example, need to maintain copies of certain records related to their financial statements and may wish to maintain a copy of the electronic filing in hard-copy format. NFA and the Commission staff will need to introduce financial statements in their proceedings and will likely want records in hard-copy format for that purpose. Members of the public must be able to obtain paper copies of the publicly available portions of the financial statements. EasyFile will support this functionality by producing printable versions of financial statements. These printable versions will be in a format that ensures they will be uniform in appearance and electronically unalterable.
Effective Date
We would like to make EasyFile filing requirements effective for IB financial statements as of June 30, 2004. This will require some lead-time to notify IBI Members and familiarize them with the system. Therefore, we are asking the Commission to put this submission on a fast track.
1 Most firms already have an SMA because it is needed for access to NFA's Online Registration System ("ORS").