• Requests for Records and Documentation

      • To
      • Chief Executive Officers; Chief Financial Officers; Chief Compliance Officers
      • From
      • Financial and Regulatory Surveillance Department, Clearing House Division
      • #
      • 17-01
      • Notice Date
      • 06 November 2017
      • Effective Date
      • 06 November 2017




       TO:        Chief Executive Offiicers                                                           #17-01        

                     Chief Financial Officers

                     Chief Compliance Officers

      DATE:      November 6, 2017

      SUBJECT: Requests for Records and Documentation

      The Financial and Regulatory Surveillance Department “FRS” is reminding all clearing member firms that prompt submission of examination related records and documentation, including responses to the General and Internal Control Questionnaires (collectively, the “Questionnaires”) is critical to ensure our risk based examinations are timely and effective in reviewing customer protections and the firm’s financial integrity. Delays by clearing member firms in providing complete and accurate examination related records and documentation may result in significant delays in the completion of risk based examinations. Such delays impact the effectiveness and efficiency of not only FRS staff but staff of clearing member firms as well.

      As a reminder, Chicago Mercantile Exchange Inc., Chicago Board of Trade, Inc., New York Mercantile Exchange, Inc. and Commodity Exchange, Inc. (collectively, “Exchanges”) respective Rule 980. Required Records and Reports requires clearing members to prepare, maintain and keep current those books and records required by the Exchanges, the Commodity Exchange Act and the regulations. In addition, those books and records must be open to inspection and promptly provided to the Exchanges, including FRS, upon request. 

      At the time that a risk based examination is announced, FRS provides a list of required documentation, including the new Questionnaires and prior year’s responses. The Questionnaires should be reviewed for completeness and accuracy and any changes in procedures should be updated accordingly. This includes providing the most up-to-date version of any procedures that are referred to separately within the applicable Questionnaires. The firm must also provide a specific point of refence within the procedure that is relevant to the Questionnaire. During the course of an examination, additional requests will be made based upon our review of the documentation provided, for example follow-up inquiries on reconciliations and capital charge computations.  

      The specific requests will be made directly to the appropriate firm personnel and/or, if requested, designated firm examination coordinator.  During risk based examinations such requests will be summarized and provided to the clearing member firm on a routine basis, generally weekly.  Staff understands that firm personnel have other responsibilities, market events may dictate other priorities, and vacation and sick time occur. Staff will work with clearing member firms on communication protocols and prioritizing information requests as needed to ensure the examination progresses smoothly.  However, complete and accurate responses to examination requests are generally expected within one week.

      The prompt submission of examination related records and documentation is essential to allow staff to complete risk based examinations efficiently and effectively which is mutually beneficial to all involved.  As a reminder, failure to promptly provide these required books and records to FRS will subject the clearing member firm to disciplinary action including staff warning letters, examination findings and other disciplinary action.

      Please contact the Financial and Regulatory Surveillance Department at (312) 930-3230 if you have any questions.