Rule 3(6) of the Rules and Regulations of the NASD OTC Market empowers NASD Plc (“NASD”) to “conduct periodic inspections to the offices of a participating institution to ensure compliance with the Rules of the Market”. However, by virtue of our Circular 40 which was issued to all Market Participants, it became necessary to conduct offsite inspections due to the restrictions on gathering in the wake of the COVID-19 pandemic.

To ensure that all Participating Institutions are given ample notice of all required documents, and to enable NASD PLC to conduct the surveillance and inspection exercise in a timely manner, kindly note that the inspection focuses on the following areas:

· Client registration (KYC) documentation

· Order management and risk management systems/policy

· Contract notes and Statement of accounts

· Dealing with clients’ funds and securities

· Banking account operations

· Trading operations and systems

· Disclosure of change in Participating Institution’s information and Authorized representatives

· Management of branches/representative office and internal control

· Investor grievance handling

· Systems and procedures pertaining to prevention of Money Laundering and Terrorist Finance.

To this effect, the following documents are required for the 2022 Surveillance and Inspection exercise:

1. CLIENT REGISTRATION

· Client Account Opening Form Procedure

· Sample of not less than two (2) duly completed Client's Files (Account Opening Form, KYC Documentation, Evidence of Identity Verification, Contract Notes, Purchase/Sale Mandates

· Evidence of CSCS Accounts for Clients.

2. ORDER MANAGEMENT AND RISK MANAGEMENT SYSTEMS

· Risk Management Policy

· Internal Control Framework/Policy

· Policy on Management of Representative Office/Branch Office

· Business Continuity Policy

· Fidelity Bond for 2022

· List of Re-activated Accounts (if any);

· Re-activation Forms and Policy

· Evidence of Payment to Clients

3. CLIENT TRANSACTIONS

· Mandate Forms

· Contract Notes

· Statement of Accounts to Clients

4. INVESTOR GRIEVANCE HANDLING

· Complaints Register

· Complaints Management Framework

5. INTERNAL CONTROLS

· Internal Control Policies for Verifying Customer Identification

· Policy on Trading Operations and Systems

· Policy on Staff Recruitment

· Policy in Relation to Insider Trading and other Unethical Conduct by Employees

 

6. SYSTEMS AND PROCEDURES TO PREVENTION OF MONEY LAUNDERING ACT AND COMBATING TERRORIST FINANCE

· AML Compliance Policy

· Evidence of Ongoing AML Training Program for All Employees

· Clients Profiling Register

7. Bank Statements:

· Trading Account

· Settlement Account

· Business/Operational Account

 

The attached excel sheet has also been provided for your attention and guidance. Each Participating Institution will be contacted at the relevant time scheduled for the exercise, and we request that you provide the requested documents within the timelines specified for the surveillance exercise.

NASD will also conduct an information session/training in the coming weeks, detailing what is expected of all Compliance Officers and will further provide any clarifications needed on this subject.

We appreciate your support and co-operation.

 

For: NASD PLC 

Omade Okanya

Compliance and Surveillance Officer