When the regulators show up at the door to conduct an inspection, will you be ready? Through our participation in more than 100 regulatory examinations as Chief Compliance Officers, we provide expert guidance to clients through Mock NFA Examinations.
Our NFA Mock Examination team is comprised of former SEC, FINRA, CFTC/NFA and MSRB regulators, in-house compliance officers and attorneys with collectively over 275 years of experience across all asset classes and investment strategies.
We offer cost-effective solutions that are flexible and tailored to meet our clients’ specific needs.
NFA Mock Examination
The NFA “Mock” Examination replicates a typical NFA examination of a commodity pool operator or a commodity trading advisor with the NFA and the CFTC, and provides an assessment of the suitability of design and effectiveness of implementation of the registrant’s compliance program, performed by way of inspection of records in response to typical advance document and information requests, detailed interviews of key adviser personnel, and pertinent trend and focused testing of processes and activities designed to uncover material gaps and/or weaknesses in the regulatory compliance control environment.
A. The NFA “Mock” Examination will assess the adequacy and suitability/customization of compliance policies and procedures and compliance monitoring and testing activities in the following areas:
- Any reports issued by other regulators to the Firm or any affiliates
- Any Exemption Letters submitted to the NFA
- Firm procedures manual, including but not limited to Promotional material Review Procedures and Sales Practice Supervision Procedures
- NFA Self-Exam Check list with corresponding notes and Annual Questionnaires
- Information Systems Security Program (ISSP)
- Cash activity
- Marketing, Advertising and Promotional Material
- Risk Management
- Financial Reporting – certified financial statements, Firm Income and Balance Sheet
- Disaster recovery/ Business Continuity Plan
- Books and Records
B. Alaric will follow these steps during the “Mock” Exam:
- Alaric will utilize an NFA Mock Examination Document and Information Request list designed to closely resemble requests being used by NFA examiners and reflecting new, and routine areas of focus in actual NFA inspections.
- Discussion of the purpose and the specific books and records detailed within Alaric’s initial NFA Mock Examination Document and Information Request.
- Registrant is to retrieve the books and records within a reasonable time-frame and Alaric will conduct a review of the books and records to identify potential findings or deficiencies, conflicts of interests, and operational and compliance risks related to the NFA requests.
- Discussions and demonstrations of the key operational processes and procedures pertaining to NFA examination document and information requests and existing compliance policies, procedures and associated internal controls in order to identify, as appropriate, any material gaps in such policies, procedures and controls.
- Assessment of the overall comprehensiveness and effectiveness of the registrant’s NFA compliance program.
- Discussion and orientation as to how to plan and respond to an actual routine NFA examination and associated NFA document and information requests.
- Sampling, testing and analysis of client account records, transactions, positions and fee billings; officer and employee personal Securities holding and transaction reports; marketing, solicitation and advertising practices; transactions with affiliates; “best execution” assessments of trade execution (including soft-dollar) arrangements; and other key compliance areas that warrant focused review.
- Conduct a walkthrough of certain processes (e.g. promotional materials have been reviewed by a Principal).
- Conduct interviews with key marketing, portfolio management, trading, operations, financial, legal and compliance personnel.
- Review samples of e-mails and social media use of personnel and other client correspondence.
- Additional follow-up requests for books and records during the examination where necessary to reach formative conclusions based on discussions, testing and reviews.
C. Project Deliverables
Provide a Written Report which will include an overall assessment of the registrants readiness for an NFA examination, including specific findings and recommendations based on document reviews and interviews, identification of gaps in recordkeeping associated with the response to Alaric’s NFA Mock Examination Matrix Document and Information Request and any apparent material deficiencies in the design, coverage and effectiveness of implementation of all key aspects of the compliance programs.
The material and information provided herein is for general informational purposes only. You should not rely upon the material and information provided herein as a basis for making any business, legal or any other decisions. Also note that actual proposals for NFA Mock Examination Services are customized based upon the specific needs of the client at the time of the request.