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This year’s NFA member regulatory workshop revealed three key trends regulated firms should keep in mind as we continue through 2023. The annual workshops update member firms and industry members about current NFA exam trends and give guidance on compliance best practices, as well providing NFA staff with an opportunity to meet with and provide guidance for their members
Supervision
One of the main areas the NFA highlighted was the appropriate supervision of associated persons (APs) and service providers. The NFA exam staff found that many firms did not complete the proper due diligence for third party service providers or appropriately supervise their APs and service providers. It’s important to ensure that APs are appropriately supervised, with regular check ins and risk appropriate controls. The staff noted that many firms did not have a system in place to supervise their APs and service providers and, therefore, would be unaware of any violations that potentially occurred.
Registration
The NFA noted that many firms were inappropriately registered, either because they failed to register an associated person, or because they failed to register someone who supervises an associated person. All APs and individuals who supervise APs must be registered with the NFA. The staff strongly urged firms to re-evaluate if they had failed to include any APs that should be properly registered under the rules.
Cybersecurity and electronic communications
The NFA rules require an up-to-date cybersecurity policy be implemented for member firms. The exam staff noted that many firms do not have adequate cybersecurity policies or training for their employees. One of the largest vulnerabilities in any firm is the susceptibility of employees to various scams or phishing attempts, making it incredibly important to have the proper staff training. The NFA takes the cybersecurity of their member firms very seriously and expects that an appropriate cybersecurity policy will include staff trainings and third-party security testing.
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