FCM Filing Requirements — Risk Exposure Reports and CCO Annual Report
The Commodity Futures Trading Commission (“CFTC”) regulations require FCMs to file with the CFTC Risk Exposure Reports on a quarterly basis and a Chief Compliance Officer (CCO) report on an annual basis.
Under CFTC Regulation 1.11, each FCM is required to establish, maintain and enforce a system of risk management policies and procedures designed to monitor and manage the risks associated with the activities of the FCM. These policies and procedures need to be in a written Risk Management Program. As part of the Risk Management Program, each FCM is required to provide to its senior management and its governing body quarterly Risk Exposure Reports. These reports are required to outline all applicable risks exposures of the FCM; any recommended or completed changes to the risk management program; the recommended time for implementing recommended changes; and the status of any incomplete implementation of previously recommended changes. Furthermore, each FCM also is required to provide its senior management and its governing body with a Risk Exposure Report immediately upon detection of any material change in the FCM’s risk exposure.
In addition to providing the risk exposure reports to its governing body, each FCM is required to provide the CFTC with a copy of the quarterly and any interim Risk Exposure Reports within FIVE BUSINESS days of providing the report to its senior management. NFA is also requiring each FCM for which NFA is the DSRO to provide NFA with a copy of the Risk Exposure Report within the same five-day time frame. Beginning with quarterly risk reports as of September 30, 2014, FCMs will be required to submit the quarterly and any interim Risk Exposure Reports to the CFTC and NFA (where applicable) through the WinJammer™ system. In order to file a Risk Exposure Report through the WinJammer™ system, the FCM must create a “Regulation Notice” in the filing index section of WinJammer™ as of the ending date of the report, and then select the “Risk Exposure Report – Futures” filing type. After selecting the appropriate notice, the FCM must upload a PDF of the report.
Annually, each FCM must have the Risk Management Program audited by a qualified independent third party. Compliance Supervisors International, Inc. offers these audit services. If you are an FCM holding customer funds and are in need of the annual Risk Management Program audit or would like to learn more about our services in this area, please contact our offices at 732-335-5740.
Under CFTC Regulation 3.3, each FCM is required to designate a Chief Compliance Officer (“CCO”). Among other duties, the CCO is required to prepare a report that covers the FCM’s most recently completed fiscal year containing the information outlined in CFTC Regulation 3.3 and provide the report to the FCM’s Board of Directors or the FCM’s senior officer. The CCO Annual Report must also be filed electronically with the CFTC not more than 60 days after the end of the FCM’s fiscal year. Pursuant to CFTC No-Action Letter 13-84 dated December 30, 2013, FCMs have 90 days from the firm’s fiscal year end to file CCO Annual Reports due in calendar year 2014. Beginning with each FCM’s next CCO Annual Report, NFA also is requiring each FCM for which NFA is the DSRO to provide NFA with a copy of the CCO Annual Report within the same 60-day time frame (90 days for reports due in calendar year 2014). FCMs will continue to file their CCO Annual Report through the WinJammer™ system. Similar to the risk exposure reports, the FCM must create a “Regulation Notice” in the filing index section of WinJammer™ as of the date of the report and then select the “Chief Compliance Officer Report” filing type. After selecting the appropriate notice, the FCM must upload a PDF of the report.