Commodity Pool Operators Internal Controls System: NFA Compliance Rule 2-9

Effective April 1, 2019 all Commodity Pool Operators having the ability to control customer funds must adopt and implement an internal controls framework.

The internal controls must be designed to protect customer funds, provide reasonable assurance that the books and records of a CPOs commodity pools are accurate and reliable, and that the CPO is in compliance with all CFTC and NFA Requirements.

Not only must CPOs have an adequate internal controls system but a strong control environment as well.  This includes adopting and implementing written policies and procedures designed to be in compliance with all applicable NFA rules and CFTC regs.

CPOs may vary in size and complexity, but key components include:

  • Separation of duties to ensure that no single employee is in a position to carry out or conceal errors, fraud, or have control over ANY two phases of a transaction or operation
  • Completion of a risk assessment to identify if the CPOs most critical risks with development and implementation of controls that address those risks

Although risks vary among CPOs, the  areas most applicable include:

  • Pool Subscriptions
  • Redemptions and Transfers
  • Risk Management, investment, and valuation of pool funds
  • Use of administrators

More discussion of this Interpretive Notice will be discussed at the NFAs upcoming Member workshop in Chicago on February 25th and in New York on February 27th.

If you need a compliance review and/or update to your procedures please call Mike Coglianese directly at 630-351-8942 or email Mike@cogcpa.com