How NFA Fights Fraud and Abuse

Introduction
NFA's Role in the U.S. Futures Industry
How NFA Fights Fraud and Abuse
Resources for Investors
Dispute Resolution
Making Self-Regulation Work
Meeting the Regulatory Needs of an Evolving Industry

How NFA Fights Fraud and Abuse

Rigorous registration requirements. NFA thoroughly screens all firms and individuals wishing to do business with the public on any U.S. futures exchange. Applicants must meet stringent fitness requirements, including providing fingerprint cards for background checks. In addition, registrants must pass comprehensive proficiency testing requirements. We also have the authority to deny, revoke, suspend, restrict or condition any firm's or individual's registration.

Comprehensive compliance rules. Over the years, NFA has adopted stringent rules covering a wide variety of areas such as advertising, telephone solicitations, risk disclosure, discretionary trading, disclosure of fees, minimum capital requirements, reporting and proficiency testing. Just as importantly, we perform audits and examinations of our Members to monitor compliance with those rules. We also conduct financial surveillance to enforce compliance with NFA's financial requirements.

Strong enforcement authority. NFA has the authority to take disciplinary actions against any firm or individual who violates its rules, ranging from Warning Letters for minor rule infractions to formal Complaints in cases where rule violations warrant prosecution. Penalties resulting from Complaints include expulsion, suspension for a fixed period, prohibition from future association with any NFA Member, censure, reprimand and a fine of up to $250,000 per violation. NFA often collaborates with the CFTC, the FBI and other law enforcement agencies to ensure successful prosecutions.

Trade practice and market surveillance. The futures industry has changed dramatically in the past few years. Long-established methods of trading, such as open-outcry, have given way to electronic trading at both traditional and new all-electronic exchanges. NFA provides a variety of regulatory services and programs to electronic exchanges to ensure the fair treatment of customers and to maintain orderly markets.