Trading and Capital-Markets Activities Manual
Activities: Investment Securities and End-User Activities (Continue)
1. Has the board of directors, consistent
with its duties and responsibilities, adopted written investment-securities
policies, including policies for when-issued securities, futures, and
forward placement contracts? Do policies outline the following:
2. Are investment policies reviewed at least annually by the board to determine if they are compatible with changing market conditions?
3. At the time of purchase, are securities designated as to whether they are investments for the portfolio or trading account?
4. Have policies been established governing the transfer of securities from the trading account to the investment-securities account?
5. Have limitations been imposed on the investment authority of officers?
*6. Do security transactions require dual authorization?
7. Does the bank have any of the following:
due from commercial banks or from other depository institutions, time,
federal funds sold, commercial paper, securities purchased under agreements
to resell, or any other money market type of investment? If so, determine
CUSTODY OF SECURITIES
*8. Do procedures preclude the custodian
of the bank securities from-
*9. Are securities physically safeguarded to prevent loss or their unauthorized removal or use?
10. Are securities, other than bearer securities, held only in the name or nominee of the bank?
11. When a negotiable certificate of deposit is acquired, is the certificate safeguarded in the same manner as any other negotiable investment instrument?
12. Do subsidiary records of investment securities show all pertinent data describing the security; its location; pledged or un-pledged status; premium amortization; discount accretion; and interest earned, collected, and accrued?
*13. Is the preparation and posting of subsidiary records performed or reviewed by persons who do not also have sole custody of securities?
*14. Are subsidiary records reconciled, at least monthly, to the appropriate general-ledger accounts, and are reconciling items investigated by persons who do not also have sole custody of securities?
15. For international-division investments, are entries for U.S. dollar carrying values of foreign currency-denominated securities rechecked at inception by a second person?
PURCHASES, SALES, AND REDEMPTIONS
*16. Is the preparation and posting of purchases, sale, and redemption records of securities and open contractual commitments performed or reviewed by persons who do not also have sole custody of securities or authorization to execute trades?
*17. Are supporting documents, such as brokers' confirmations and account statements for recorded purchases and sales, checked or reviewed subsequently by persons who do not also have sole custody of securities or authorization to execute trades?
*18. Are purchase confirmations compared to delivered securities or safekeeping receipts to determine if the securities delivered are the securities purchased?
DERIVATIVE CONTRACTS CONTROLS
19. Do end-user policies-
20. Are the formalized procedures used by
21. Are the bank's futures commission merchants
and forward brokers-
22. Has the bank established end-user limits-
23. Does the bank obtain prior written approval
detailing amount of, duration, and reason-
24. Are these exceptions subsequently submitted to the board or an appropriate board committee for ratification?
25. Does the trader prepare a pre-numbered trade ticket?
26. Does the trade ticket contain all of
the following information:
27. Are the accounting records maintained and controlled by persons who cannot initiate trades?
28. Are accounting procedures documented in a procedures manual?
29. Are all incoming trade confirmations-
30. Does the bank maintain general-ledger
control accounts disclosing, at a minimum-
31. Are futures and forward contracts activities-
32. Do periodic statements received from
futures commission merchants reflect-
33. Are all of these periodic statements-
34. Are the market prices reflected on the
35. Are daily reports of unusual increases in trading activity reviewed by senior management?
36. Are weekly reports prepared for an appropriate
board committee which reflect-
37. Is the futures and forward contracts portfolio revalued monthly to market value or the lower of cost or market?
38. Are revaluation prices provided by persons or sources totally independent of the trading function?
39. Does the board of directors receive
regular reports on domestic and international division investment securities
40. Are purchases, exchanges, and sales of securities and open contractual commitments ratified by action of the board of directors or its investment committee and thereby made a matter of record in the minutes?
41. Is the foregoing information an adequate basis for evaluating internal control? Are there significant deficiencies in areas not covered in this questionnaire that impair any controls? Explain any deficiencies briefly and indicate any additional examination procedures deemed necessary.
42. Based on a composite evaluation, as evidenced by answers to the foregoing questions, is internal control adequate or inadequate?
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