New CTAs can expect to have their place of business audited by the NFA within six to twelve months after their registration becomes effective and they begin managing money. After that, you can expect them approximately every twenty-four months; sooner if they happen to be in the neighborhood.

Be absolutely sure your back office is set up to the NFA's rules and guidelines. The rules are quite clear and defined but not terribly onerous. You must follow every rule and regulation and be audit ready, because you will not get very much advanced notice. It may even be worth your while to conduct mock audits annually just to be sure you're ready.

The NFA`s compliance department will send you a CTA Self-Examination questionnaire, which will cover in detail the scope of the audit plan. This questionnaire, designed to help NFA members carry out their supervisory responsibilities, focuses on six major areas:

Performance Record Testing


General Information

This first area will focus on general information about the firm, including any branch offices, the ownership and registration of the principals and Associated Persons (APs). This component of the audit will also examine compliance with NFA Bylaw 1101, which prohibits a registered NFA member from doing business with a non-member who is required to be registered or any suspended member. Do not do business with any non-members of the NFA who are required to be members.


Records

The focus of the records review is mainly concerned with customer account documentation. You should maintain separate account files with all the required documentation under CFTC Regulations.

Make sure all documentation is reviewed, signed, dated and the initial deposit is in the account prior to assigning any trades to an account. If you are not highly organized in this component of the audit, it can be particularly problematic. The assumption is that any disorganization is representative of other weak areas within your firm and can result in an expanded scope of the audit.





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