Proposed Rule2017 | 2016 | 2015 | 2014 | 2013 | Show more years
(additions are underscored)
* * *
SECTION 15. FOREX DEALER MEMBER INTERNAL FINANCIAL CONTROLS.
(a) No Member may act as a Forex Dealer Member (as defined in Bylaw 306) until it has provided NFA with an internal control report prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. The internal control report shall contain, at a minimum, a detailed explanation of the examination performed by the accountant and a representation by the accountant that it has examined and tested the Forex Dealer Member's system of internal controls to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The internal control report must also represent that the accountant has found that the Forex Dealer Member's system of internal financial controls has no material weaknesses and that it is adequate for establishing and maintaining internal control over financial reporting by the Member.
After a Forex Dealer Member has commenced business, NFA's Compliance Director may require it to provide an internal control report that complies with the requirements above if NFA believes that the Forex Dealer Member's internal controls are inadequate.
(b) Provided NFA's Compliance Director believes that a Forex Dealer Member's financial records are inadequate, the Compliance Director may require a Forex Dealer Member's annual certified financial statements to be prepared by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act.
(c) The individuals who prepare the Forex Dealer Member's financial books and records must be under the ultimate supervision of a listed principal and registered associated person of the Member. This principal must also be responsible for researching and selecting the independent public accountant that certifies the firm's annual financial statements.
* * *
* * *
3. Supervision - Members and their Associates having supervisory responsibilities must diligently supervise the Member's forex business, including the activities of the Member's Associates and agents. Members must establish, maintain, and enforce written supervisory procedures.
A Forex Dealer Member and a listed principal that is also a registered associated person (see Financial Requirements 15(c)) must supervise the preparation of a Forex Dealer Member's financial books and records. Diligent supervision includes hiring and retaining qualified staff. In determining whether an individual responsible for preparing the Member's financial books and records is qualified, the firm and its financial principal should consider the following:
- Is the individual qualified for the position by experience or training?
- Does the individual exercise independent judgment?
- Has the individual ever been sanctioned or refused membership or licensing by NFA, the CFTC, the SEC, NASD, the Public Company Accounting Oversight Board, or any other financial regulator?
- Has the individual ever been sanctioned or refused membership by the American Institute of Certified Public Accountants or any other accounting organization?
- Has any firm for which the individual performed auditing, accounting, or bookkeeping been subject to an emergency action or sanctioned by NFA, the CFTC, the SEC, NASD, the Public Company Accounting Oversight Board, or any other financial regulator for failure to comply with financial requirements or for having inadequate books and records while the individual was engaged in those activities?
- Are there any pending actions against the individual or a firm for which the individual performed auditing, accounting, or bookkeeping?
This is not an exclusive list. If the individual or a firm for which the individual worked (either as an independent contractor or an employee) was subject to an emergency action, sanctioned by a financial regulator, or is subject to a pending action, the FDM and the listed principal/registered AP responsible for the FDM's financial books and records should consider the nature and seriousness of the conduct (or alleged conduct) and the individual's role in it. An NFA Member Responsibility Action or an emergency action by another financial regulator is always an extremely serious matter.
The Forex Dealer Member and its financial principal must also conduct due diligence and consider analogous information when selecting an independent public accountant to certify the firm's annual financial statements.