Current through Register Vol. 48, No. 38, September 20, 2024
a) Right of
Examination and Working Conditions
1) The
licensee shall permit the Department to examine all warehouse facilities,
records or inventory without prior notice. The licensee shall provide
reasonable access to records at the location where records are maintained, or,
if the records are located outside the State of Illinois, the Department may
require that the records be brought to a specified location in Illinois for
review by the Department. The licensee shall provide reasonable assistance as
requested to perform the examination. The licensee shall reasonably remove
risks or hazards that may be encountered during an examination. The licensee
shall provide the necessary assistance to any authorized representative of the
Department for the safe measurement and sampling of the grain
inventory.
2) The licensee shall
provide an acceptable work place at the location where the master books and
records are maintained in order to allow any authorized representative of the
Department to perform an examination.
b) Examination Levels
Pursuant to Section 1-15(2) of the Code, the Department shall
examine and inspect each licensee at least once each calendar year. The
Department shall perform one of three types of examination of licensees: basic
examination; intermediate examination; or advanced examination. In ascertaining
the level of risk present in a licensee's merchandising and trade practices, as
part of the Department's determination as to which level of examination should
be appropriate to a particular licensee, the Department may take into account
such factors as the level of sophistication and experience of the licensee's
merchandising personnel; the overall financial resources of the licensee, as an
indication of ability to absorb and assume risk; the historical experience of
the licensee with regard to the particular merchandising and trade practices
being used; and the extent of the use of certain practices as a proportion of
all merchandising and trading practices of the licensee.
1) The basic examination shall be performed
when the licensee's merchandising and trade practices involve minimal market
risk, including cash back-to-back contracts, traditional hedges with the
Chicago Board of Trade and price later contracts.
2) The intermediate examination shall include
all of those matters done as part of the basic examination and shall be
performed when there is an increased amount of risk, including situations in
which the licensee uses guaranteed minimum price contracts, purchases options
or writes options.
3) The advanced
examination shall include all those matters done as part of the intermediate
examination and shall be performed when the licensee's merchandising and grain
practices involve the most risk, including when the licensee has discretionary
trading authority from producers, uses premium offer type contracts, or has
contracts with producers that cover multiple crop years. The advanced
examination shall include grain market risk evaluation, appropriate levels of
risk for the licensee and adequacy of internal controls.
c) Examinations may include, but are not
limited to, the following:
1) Verification of
grain quality and quantity;
2)
Reconciliation of records of grain transactions, including, but not limited to,
random selection of a sample of customer accounts and mailing of confirmations
to verify accuracy of those records;
3) Computation of current ratios as provided
in the Code;
4) Checking of posting
procedures for accuracy;
5) Grain
market risk evaluation and appropriate levels of risk for the
licensee;
6) Examination of the
most recent monthly financial statements of the licensee;
7) Review and evaluation of the internal
recordkeeping systems and controls of the licensee;
8) Evaluation of the long/short market risk
report for accuracy, complete accounting and full disclosure;
9) Random spot checks and examination of
specific contract information for each type of contracting method used by the
licensee; and
10) Market risk
information reported by the licensee, at the commencement of the examination,
on a form prescribed by the Department. The prescribed form shall include, but
is not limited to:
A) Names of key personnel
and/or business associates related to grain merchandising
transactions;
B) Marketing programs
offered; and
C) Types of
contracts.
