CFTC Amends SRO Financial Surveillance Programs For FCMs

Author:Mr Cadwalader, Wickersham & Taft LLP
Profession:Cadwalader, Wickersham & Taft LLP

The CFTC amended its rule governing the standards for a self-regulatory organization's ("SRO") financial surveillance examination program of futures commission merchants ("FCMs"). Pursuant to CFTC Rule 1.52, SROs of designated contract markets are required to monitor an FCM member's compliance with the designated contract markets' minimum financial requirements. The amendments adopted by the CFTC revise the scope and frequency of certain requirements of this program.

While the amendments still require an "examinations expert" to review the SRO's supervisory standards, it eliminates the current requirement that the expert evaluate the sufficiency of the program's risk-based approach or internal controls testing.

The amendments further require an SRO to engage a third-party expert at least once every five years (formerly three years) to assess any material changes in its FCM examination standards resulting from Public Company Accounting and Oversight Board ("PCAOB") changes to its audit standards, even if the SRO determines that the...

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