Preparing to perform in the face of a regulatory examination
An NFA examination involves a deep and thorough review of your operations, compliance arrangements and recordkeeping, so it’s advisable to be prepared for a visit.
Regulatory examinations are driven by various factors such as length of NFA registration, funds under management, material changes in operations, prior examination findings, concerns noted in review of financial filings, emerging risks and trends, customer complaints and as a response to tips.
NFA regularly examines newly registered firms (especially 6-month IBs), firms which have not been examined, firms which have not had a recent examination, and firms with material findings in previous exams.
Bovill’s NFA mock exam prepares you for the real thing
Deficiencies in a regulatory exam can cause reputational damage, fines, and action to be taken against your firm and your firm’s personnel.
Mock exams help identify areas of weakness for NFA members ahead of an NFA examination. The goal of a mock exam is to provide essential practice for effective and efficient interactions with the NFA to ensure the firm is abreast of potential violations.
Our approach to NFA mock exams
Bovill’s mock exam process assesses controls and adherence to compliance policies and procedures. We tailor the scope of the
mock exam to your business and proactively work to ensure the mock exam meets your objectives while keeping you aware of what the NFA will expect. Mock exams can be broadly focused or targeted – just like a real NFA exam.
Bovill’s mock exams are designed to prepare NFA members to better understand the NFA’s examination process and priorities while preparing your firm’s personnel for the type of discussions conducted by the NFA.
What to expect
The diagram below illustrates the typical timeline for an NFA mock exam which, similar to an NFA examination, depends on the scope of the review and size of the firm.
- Pre-exam review
Prior to beginning any mock exam, we review publicly available information and documents to define the scope of the examination and hold a discussion to get a better feel for your operations. The scope of the mock exam will be determined based on the following:
- NFA exam priorities respective to your registration category/categories
- Recent NFA risk alert
- Previous regulatory examinations
- Any customer complaints.
- Initial document request
An initial detailed document request list is issued following the pre-exam firm review. Bovill, like the NFA, tailors its requests based on your firm’s identified risks. Requested documents usually include the following for all firms:
- General organizational and supervisory structure/chart
- Compliance programs and procedures (i.e. DDOC ISSP, AML, Supervision, BCDR, Ethics, Trading, Internal Controls, etc.)
- Performance and promotional materials (advertising/marketing materials)
- Financial records (respective of the requirements for the firm’s registration category)
- Review of registered pools’ operations.
- Document preparation
Once the document request list is issued, the firm is responsible for producing documents by the stated deadline. NFA generally has aggressive deadlines for document production, thus, a major part of the mock exam is testing your ability to produce records in the allotted time. The document preparation process underscores the importance of a sound document retention policy.
- Document review
After the firm provides the requested documentation, 2-4 weeks will be spent reviewing the documents provided. During the document review, we will underscore crucial topics to further discuss during the onsite* portion of the mock exam.
- Onsite work: interviews and follow-up requests
The onsite portion of the review is designed to gain further insight into your day-to-day operations and to gauge whether your documentation is sufficiently representative of your operations. Observation of an interaction with your key personnel and employees and interviews with select staff to identify risks, conflicts of interest, and inconsistencies are further benefits of an onsite mock exam. Additionally, the onsite portion of the review also provides the opportunity to work through the logistics of a real exam and assess personnel’s preparedness to speak with regulatory authorities.
- Examination report preparation
At the end of the mock exam, we prepare a detailed findings report that addresses all identified deficiencies. Reports can be written and/or verbal, depending on preference. Written reports are provided initially in draft form to allow for clarifications before agreeing to a final version. We will make recommendations where there are opportunities for improvements; these might include changes to written policies and procedures, changes to processes, and follow-up training for specific individuals.
The debrief is a time to discuss the mock exam findings report and to assess the mock exam process as a whole.
Start your journey
Get in touch using the the form below and a member of the team will get back you as soon as possible.