The CFTC proposed simplifying requirements for self-regulatory organizations ("SROs") conducting financial surveillance on futures commission merchants ("FCMs").
The proposal would amend CFTC Rule 1.52 ("Self-Regulatory Organization Adoption and Surveillance of Minimum Financial Requirements"). The proposal is a response to public feedback indicating that current regulations are burdensome and costly. CFTC Rule 1.52 requires, among other things, that SROs conduct routine examinations of member FCMs for compliance with both SRO and CFTC capital and other financial and related reporting requirements. The rule also requires each SRO to engage an independent third party to evaluate the SRO's supervisory program at least once every three years.
The proposal would (i) limit the scope of the third-party evaluation of the SRO's financial surveillance program to a review of the auditing standards employed by the SRO when conducting FCM examinations, and (ii) make more flexible the timeframe for when an SRO must use a third-party expert to evaluate its FCM examination standards. Under the proposal, an expert would be required to evaluate the standards only following the issuance of new or revised material auditing standards affecting FCMs (by either the Public Company Accounting Oversight Board or the Joint Audit Committee) rather than "once every three years" so long as the expert is engaged no less frequently than once every five years.
Comments on the proposal will be due 60 days following the date of its publication in the Federal Register.
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