As your industry advocate, the NIBA provides many services which help your business stay in compliance with NFA regulations. "Ask the NFA," is the way you can ask questions about those regulations and compliance requirements without having to call NFA directly.
Just email us at nfacomments@theniba.com and we will get the answers for you. Please keep in mind the purpose of this contact is to keep the lines of communication between NFA and NIBA members open, not to fix any specific individual concerns.
This month's questions were selected from those submitted by NIBA members. The answers were supplied by NFA staff.
Q: If my office is required to record phone calls, do intra office calls need to be recorded or just calls with prospective and current customers?
A: It depends on the rule that requires your office to record phone calls.
NFA Compliance Rule 2-10 in part, requires that Members maintain adequate books and records, including records required under CFTC Regulation 1.35. The Regulation requires recordings of FCMs, IBs that generated more than $5 million in aggregate gross revenues over the preceding three years, and RFEDs to record oral communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest and any related cash or forward transactions for a period of one year.
NFA Compliance Rule 2-36, for Member firms meeting the criteria requiring them to adopt the enhanced supervisory requirements, are required to make complete audio recordings of all telephone conversations that occur between their APs and both existing and potential customers, including existing and potential retail forex customers of Members subject to NFA Compliance Rule 2-36.
Q: I voluntarily record my phone calls, will I be asked for tapes during an audit in the same manner as if I were required to record?
A: Voluntarily recorded calls are considered to be part of your books and records, and may be asked for during an exam.
Q: "I have two questions on the new audit system: Why are internal controls at an IB such a large focus? What is the reason for so many risk based items being discussed that seem general in nature but are being applied to the IB model?"
A: NFA Compliance Rules place a continuing obligation on every Member to diligently supervise its employees and agents in all aspects of their futures and forex activities. In order to meet this obligation, NFA Members must implement an internal control system that is designed to provide reasonable assurance that the Member is in compliance with all CFTC, NFA, and where applicable, other self-regulatory organization requirements.
In order to satisfy these continuing supervisory responsibilities, NFA Members must review their operations on an annual basis using NFA's self-examination questionnaire. This document, which is an important part of assessing a firm's internal controls, can be found on NFA's website: http://www.nfa.futures.org/NFA-compliance/publication-library/self-exam-questionnaire.HTML