The Audit Department is reminding all clearing member firms of Audit Information Bulletin #10-03 Risk-Based Examinations – Requests for Records and Documentation, issued on April 15, 2010, that prompt submission of examination related records and documentation is critical to ensure our risk based examinations and limited reviews are timely and effective in reviewing customer protections. Delays by clearing member firms in providing examination related records and documentation to CME Group’s Audit Department staff have resulted in significant delays in the completion of risk based examinations. Such delays impact the effectiveness and efficiency of not only Audit Department 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 the Audit Department, upon request.
The Audit Department provides a list of required documentation at the time a risk based examination or limited review is announced providing the clearing member firm time to gather the information before fieldwork begins. Further, 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.
The prompt submission of examination related records and documentation is essential to allow staff to complete risk based examinations and limited reviews efficiently and effectively which is mutually beneficial to all involved. As a reminder, failure to promptly provide these required books and records to the Audit Department will subject the clearing member firm to disciplinary action including staff warning letters, examination findings and other disciplinary action.
Please contact the Audit Department at (312) 930-3230 if you have any questions.