Thu, Oct 17, 2019
Due to advances in electronic trading, electronic communications and other technologies and to incorporate references to existing anti-money laundering, information systems security program and bunched order requirements, the National Futures Association (NFA) has updated the interpretive notice for Compliance Rule 2-9: Supervision of Branch Offices and Guaranteed IBs.
The updated interpretive notice can be immediately operationalized, will replace the prior notice and becomes mandatory on January 1, 2020. The notice has been divided into three sections: due diligence reviews, written supervisory policies and procedures and ongoing training.
This section addresses the due diligence reviews necessary to determine whether to establish or modify a branch office or guaranteed IB relationship and the appropriate supervision required. One of the substantive changes in this section requires members to ensure that one or more individuals at the branch office or guaranteed IB are knowledgeable about and will track developments related to the Commodity Exchange Act, Commodity Futures Trading Commission (CFTC) regulations and NFA rules.
This section addresses the supervisory policies and procedures and the annual inspection requirement for branch offices and guaranteed IBs. Such policies and procedures must include routine surveillance and supervision designed to identify and address potential issues as they arise, and periodic inspections designed to perform a more comprehensive and detailed review of a branch office or guaranteed IB's business. The updated section includes substantive changes such as:
The updated interpretive notice requires members to implement policies and procedures designed to ensure that branch office and guaranteed IB personnel receive adequate training to ensure they follow industry rules and regulations, properly handle customer accounts and satisfy ethics training requirements.
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