The NFA had a busy June even amidst the Covid-19 crisis. The association recently revised its self-examination questionnaire, something members must complete annually. We’ve also seen several reviews of international members, including four of our own clients.
NFA revises self-examination questionnaire
The National Futures Association (NFA) recently revised its self-examination questionnaire, which member firms must complete annually. The revisions reflect rule amendments that became effective over the past year and it’s crucial you get on top of the following changes:
- Compliance Rule 2-9: supervision of branch offices and guaranteed IBs
- Compliance Rule 2-29 and 2-36 regarding communications with the public and promotional material
- Compliance Rule 2-8 and 2-30 related to allocation of bunched orders for multiple accounts
The NFA has also developed revision notes for the self-examination questionnaire that specify the recent changes. You can find the notes here, all of which are broken down into substantive and non-substantive revisions.
In recent reviews, the NFA has been citing firms for failure to complete the self-examination questionnaire in a timely manner and has seen many members not conducting a review annually.
NFA and CFTC remain active with overseas market participants
The NFA remains active in their reviews of global members, despite no longer sending exam teams physically onsite. Anecdotally, we’ve had four Asia-based clients undergo (or currently undergoing) NFA examinations since the beginning of the year. To stay out of trouble and avoid hefty fines, make sure you’re prepared for a surprise review.
NFA permanently bars Hong Kong firm
On June 1, a Hong Kong-based commodity pool operator, its sole principal and associated person were permanently barred by the NFA’s business conduct committee for violations during an examination. The firm didn’t respond to the NFA in a compliant and timely manner during the examination in violation of compliance Rule 2-5.
CFTC orders UK company to pay over $490,000 for registration and supervision violations
In addition, the CFTC (with assistance from the FCA) recently fined a UK-based retail forex broker over $490,000 for two violations. The first violation was acting as a counterparty to retail foreign exchange customers located in the United States, without registering as an RFED as required by the CEA and CFTC regulations. Additionally, the firm failed to diligently supervise the handling of the account of a retail forex customer located in the United States.
How we can help
Bovill can help complete NFA self-examination questionnaires by providing advice and interpretation, as well as acting as an additional compliance resource during the time of review. We can provide examination support and mock examination services for members, advise you when dealing with US customers on registration and exemptions questions, as well as assist with NFA membership applications.