Sep 27, 2022 By: Turnkey Trading Partners Believe it or not the fourth quarter of 2022 has begun! As the end of the year approaches Turnkey wanted to remind readers that it’s time to begin with a number of annual housekeeping items. Being on top of annual requirements is especially important right now given NFA’s resumption of in person audits. Turnkey has seen a notable uptick in customers receiving notice from NFA of an upcoming routine examination. Taking a pro-active approach to year end compliance and operational obligations can make audits, as well as holiday season, that much more enjoyable for everyone. Please take a moment to consider the following checklist Turnkey has put together to get you thinking about your upcoming obligations: Training, Reviews, and Attestations Have all your annual ongoing education and training obligations been met? Training obligations tend to be overlooked, but they are required and should be made a priority. Examiners have been focused on this area in 2022 since many in the industry have been working from home for several years. For more details about training and how Turnkey can help you meet this obligation; please review our recent article about Turnkey’s new training division by clicking here. Every year there are a number of compliance policy attestations which must be signed and kept on file. You should ensure to timely complete these attestations as applicable. An example would be that generally, policies must be circulated to all staff and signed off on as having been read each year. The NFA self-exam checklist must be completed annually. Items like this can get lost in the shuffle. There are a number of annual reviews which are required to be completed. Many of these reviews can be done by firms internally, some of them require an external auditor. Evidence of reviews must be documented and kept on file. Examples of reviews would be testing of a firms BCDR, ISSP, or AML programs. Other less obvious review items could be annual consideration of third-party vendors, agreements, or promotional material. Accounting End of the year tax items: have you made sure to send out form W9 to all independent contractors? You’ll need the information from this form to properly issue 1099’s and be compliant for tax purposes. Additionally, you’ll need to make sure that you have properly tracked all payments to these contractors. Now is the time to begin preparing for certified audits. If your firm is required to have a certified audit, have you reached out to your audit firm to ensure they are prepared to compile your financials for 2022? At this point engagement letters should be signd and exam dates coordinated. Also don’t forget form 1-FR-IB must be certified by no later than 90 days after the close of your fiscal year. Monthly Bookkeeping: are you keeping the necessary books and records to meet your regulatory obligations? NFA heavily scrutinizes the accounting of all registrants. They primarily want to ensure compliance with the filing of forms 1-FR, CTA-PR and CPO-PQR. Third Party Performance Verification: are you producing performance figures in house? It’s time to make the switch! Investors prefer third party calculated rates of return and advisory fees over internal numbers. Regulators also increasingly scrutinize company internal controls and conflicts of interest. If you’d like to discuss Turnkey’s offerings in this area, please feel free to give us a call. Compliance was the last time you refreshed your policies and procedures manual? If you have not done so within the past year, please be sure to review your policies against NFA’s latest self-exam checklist. 2021 and 2022 have had many changes that need to be included. Have you visited all of your branch offices or GIBs in the last 365 days? Do you have a new review plan in place for NFAs updated guidelines? If you dropped branch offices under Interpretive notice 9002; are you meeting your ongoing supervisory obligations for existing remote locations? Although an annual audit is not necessarily required, a review of the status of outside offices and whether or not they meet the definition of a branch must be completed at a minimum. If you or any customers rely upon any 4.13 exemptions, have you confirmed the annual reaffirmation of that status with NFA? Has your firm met NFA’s Third-Party Service Provider (“TPSP”) policies and procedures requirement? The TPSP obligation requires that CFTC registrant, NFA member firms have in place official: Initial risk assessment; On-boarding due diligence; Ongoing monitoring; Termination; and Record-keeping. Did you remember to send out your firm’s latest privacy policy as required by the FTC, CFTC, and NFA? Has your firm been proactive about applicable email, chat, voice, and other electronic communication review obligations? Have these reviews been systematically documented in writing? Have you evaluated and properly updated all applicable firm information within NFA’s online registration system? Have you reviewed all broker disciplinary and criminal disclosure histories to ensure there have been no changes during the year? Have you asked brokers if they have been convicted of any crimes which may disqualify them from working at the firm? Have you reviewed all customers and business relationships for compliance with NFA Bylaw 1101? Do you have that feeling NFA will be contacting you about an audit any day now? Are you woefully unprepared to meet your annual compliance obligations? Feel free to give us a call to get prepared for your next exam while there’s still time!