Compliance Requirements for Futures Commission Merchant (FCM) Applicants
Firms applying as a futures commission merchant (FCM) have a financial filing requirement (either a Form 1-FR-FCM or a FOCUS report), which can be met in one of the following ways:
- A financial statement certified by an independent public accountant as of a date not more than 45 days prior to the date on which such report is filed; or
- A financial statement as of a date not more than 17 business days prior to the date on which such report is filed and a financial statement certified by an independent public accountant as of a date not more than one year prior to the date on which such report is filed.
NFA expects an applicant FCM's adjusted net capital to be above the early warning requirement. Applicants that cannot meet the early warning requirement are subject to additional reporting obligations until they have sufficient capital.
A firm's registration as an NFA Member FCM will not be complete until the FCM designates an individual as a Chief Compliance Officer (CCO) and lists the CCO as a principal of the FCM.
An FCM may also need to provide compliance procedures, additional documentation and written representation to NFA for review as part of the application. Such procedures, documents and representation would generally include, but are not limited to:
- Anti-Money Laundering Procedures
- Business Continuity and Disaster Recovery Procedures
- Cybersecurity Procedures
- Risk Management Procedures
- Electronic Order Routing Systems Procedures
- Promotional Material Procedures
- Supervision of Associated Persons Procedures
- Customer Complaint Procedures
- Margins Procedures (if applicable)
- Source of Assets Letter, describing the source of the firm's current assets (including the names of any individuals and/or entities that have contributed capital to the firm and the amount of capital contributed by each individual and/or entity) and represents that the capital has been contributed for the purpose of operating the business and will continue to be used for such purpose as required by CFTC Regulation 1.10. The Source of Assets Letter should be signed by a Principal of the firm and on firm letterhead
- Corporate Documents Procedures
- For securities broker-dealers, a copy of the most recent report from the securities DSRO and the firm's response
- If the firm has been examined by another regulatory agency, a copy of the most recent report
- Copies of Subordinated Loan Agreements (if applicable)
- All financial statements either are or must be filed electronically through WinJammerTM
As NFA is conducting a review of the firm's financial operations, NFA will often request additional items not listed above, such as bank statements, general ledger, wire advices and cancelled checks. An FCM will not be approved until NFA reviews and approves all requested items. These financial and procedural items can be submitted to NFA through NFA's Regulatory Filing System.