Home > FAQs > Compliance > Enhanced Supervisory Requirements

Enhanced Supervisory Requirements

  1. What are the enhanced supervisory requirements?
  2. What are the criteria NFA uses in determining who must comply with the enhanced supervisory requirements?
  3. What is a Disciplined Firm for purposes of the enhanced supervisory requirements?
  4. If my firm is a Disciplined Firm, does it have to comply with the enhanced supervisory requirements?
  5. Where can I find the Disciplined Firm List?
  6. How will I know when a firm is removed from the Disciplined Firm List because it's sanction is more than five years old?
  7. Can I use ORS to search the registration history of a broker I am considering sponsoring as an AP to see if he previously worked for a firm on the Disciplined Firm List?
  8. I am responsible for knowing how many APs and principals at my firm previously worked for a Disciplined Firm. How can I obtain that information?
  9. If my FCM becomes the guarantor of an IB that is currently listed on NFA's five-year disciplined firms list, will I need to count the APs registered at the IB as if they were registered at my FCM?
  10. If my firm qualifies for the enhanced supervisory requirements, can we take any steps to avoid adopting them?
  11. How does the waiver process work?
  12. What factors does the Waiver Committee consider in reviewing a waiver request?
  13. I used to work as a broker for a firm that NFA later added to the Disciplined Firm List. Will I be designated as an AP who has worked at a Disciplined Firm?
  14. Do FDMs and independent IBs that qualify for the enhanced supervisory requirements have higher capital requirements?
  15. Does a CPO or CTA that qualifies for the enhanced supervisory requirements have to meet capital requirements?
  16. My firm has qualified and must comply with the enhanced supervisory procedures. How does the promotional material requirement work?

1. What are the enhanced supervisory requirements?

These are additional requirements that Members must comply with if they meet certain criteria. The additional requirements include tape-recording sales solicitations, increased capital, and filing promotional material and reports with NFA. See Section II of the Interpretive Notice 9021.

Back to the Top

What are the enhanced supervisory requirements?

2. What are the criteria NFA uses in determining who must comply with the enhanced supervisory requirements?

The requirements are imposed on Members that meet specific criteria based on the disciplinary history of their APs and principals or on their commission levels. Section III of the Interpretive Notice 9021 describes these criteria.

Back to the Top

What are the criteria NFA uses in determining who must comply with the enhanced supervisory requirements?

3. What is a Disciplined Firm for purposes of the enhanced supervisory requirements?

A Disciplined Firm is one that has been sanctioned by NFA or the CFTC during the last five years or permanently barred by NFA or the CFTC based on a formal charge of sales practice or promotional material violations or a firm that has been ever been sanctioned for sales practices involving the offer, purchase or sale of security futures products.

Back to the Top

What is a Disciplined Firm for purposes of the enhanced supervisory requirements?

4. If my firm is a Disciplined Firm, does it have to comply with the enhanced supervisory requirements?

Not for that reason alone. However, the firm may be subject to the enhanced supervisory requirements for other reasons, such as the background of its APs or the commissions it charges.

Back to the Top

If my firm is a Disciplined Firm, does it have to comply with the enhanced supervisory requirements?

5. Where can I find the Disciplined Firm List?

Members can find the Disciplined Firm List through the Report Center on NFA's Online Registration System (ORS).  Most APs do not have access to ORS and will have to check a firm's disciplinary history on BASIC to see if it qualifies as a disciplined firm.

Back to the Top

Where can I find the Disciplined Firm List?

6. How will I know when a firm is removed from the Disciplined Firm List because it's sanction is more than five years old?

If you are a Member, you can check the Disciplined Firm List in ORS. If you are an Associate, you can check the firm's disciplinary history in BASIC. The firm will come off the Disciplined Firm list five years after the Penalty Date listed in BASIC unless the firm was permanently barred, was sanctioned for sales practices involving security futures, or has a more recent sanction for sales practice and promotional material violations that is less than five years old. 

Back to the Top

How will I know when a firm is removed from the Disciplined Firm List because it's sanction is more than five years old?

7. Can I use ORS to search the registration history of a broker I am considering sponsoring as an AP to see if he previously worked for a firm on the Disciplined Firm List?

Yes. The broker's ‘Status History' screen in ORS indicates if a current or former AP has been employed by a Disciplined Firm.

Back to the Top

Can I use ORS to search the registration history of a broker I am considering sponsoring as an AP to see if he previously worked for a firm on the Disciplined Firm List?

8. I am responsible for knowing how many APs and principals at my firm previously worked for a Disciplined Firm. How can I obtain that information?

The ‘Firm Profile' menu on the firm's ORS Status page includes a link to a screen called, "Disciplined Employee Summary." This screen will give you the information you need. 

FCM Members who guarantee IBs can also view combined information for the firm and its guaranteed IBs. However, ORS will not allow you to view information related to firms you are not associated with or do not guarantee, so  you should ask a potential guaranteed IB to provide this information before your firm enters into a guarantee agreement.

Back to the Top

I am responsible for knowing how many APs and principals at my firm previously worked for a Disciplined Firm. How can I obtain that information?

9. If my FCM becomes the guarantor of an IB that is currently listed on NFA's five-year disciplined firms list, will I need to count the APs registered at the IB as if they were registered at my FCM?

Yes. Under the Interpretive Notice to Compliance Rule 2-9:  Enhanced Supervisory Requirements, the APs of an FCM's GIBs will be treated as APs of the FCM for determining whether the FCM meets the criteria to adopt the enhanced supervisory requirements. The sole exception to this rule would occur if the GIB were added to the five-year disciplined firms list after the effective date of its guarantee agreement with the FCM. In that case, the APs of the GIB would not be counted toward the FCMs total number of APs with at least one disciplined firm in their background as long as they have not been registered at any other firms on NFA's disciplined firms list. 

Note that if an FCM enters into a guarantee agreement with an IB that has been charged in an NFA or CFTC enforcement action alleging sales practice or promotional material violations and the charges have not been resolved, the APs of the GIB would count toward the FCMs total number of APs with at least one disciplined firm in their background if the GIB is subsequently added to the five-year disciplined firm's list.

Back to the Top

If my FCM becomes the guarantor of an IB that is currently listed on NFA's five-year disciplined firms list, will I need to count the APs registered at the IB as if they were registered at my FCM?

10. If my firm qualifies for the enhanced supervisory requirements, can we take any steps to avoid adopting them?

Once your firm meets the enhanced supervisory criteria, it must adopt the requirements unless it files a petition for a waiver with the Telemarketing Procedures Waiver Committee and the Committee grants your firm's waiver request. In addition, changing the firm's personnel composition after it meets the criteria won't affect your firm's qualification status, so you cannot avoid it by terminating an employee who was included in the count of APs or principals who were previously employed by a Disciplined Firm. 

Back to the Top

If my firm qualifies for the enhanced supervisory requirements, can we take any steps to avoid adopting them?

11. How does the waiver process work?

Firms may ask for a partial or full waiver from complying with the enhanced supervisory requirements by filing a petition with the three-person Telemarketing Procedures Waiver Committee within 30 days after NFA notifies the firm that it is required to adopt the requirements. If your firm fails to file a timely waiver request, then it may not ask for a full or partial waiver again until at least two years have passed since the firm adopted the enhanced procedures. Similarly, if the Waiver Committee denies your waiver request, your firm may not ask for a waiver again until at least two years have passed since your firm adopted the required enhanced procedures.

Back to the Top

How does the waiver process work?

12. What factors does the Waiver Committee consider in reviewing a waiver request?

See the non-exclusive list in Section IV of the Interpretive Notice 9021.

Back to the Top

What factors does the Waiver Committee consider in reviewing a waiver request?

13. I used to work as a broker for a firm that NFA later added to the Disciplined Firm List. Will I be designated as an AP who has worked at a Disciplined Firm?

Probably, although there are limited exemptions for individuals who worked at a Disciplined Firm a long time ago or for a short period of time. See Section A-4 of the Interpretive Notice at 9021 for a complete description of the exemptions.

Back to the Top

I used to work as a broker for a firm that NFA later added to the Disciplined Firm List. Will I be designated as an AP who has worked at a Disciplined Firm?

14. Do FDMs and independent IBs that qualify for the enhanced supervisory requirements have higher capital requirements?

Yes. See the Interpretive Notice 9021 for the specific capital requirements that apply. Affected Members can ask the Telemarketing Procedures Waiver Committee for a waiver from complying with the increased capital requirement.

Back to the Top

Do FDMs and independent IBs that qualify for the enhanced supervisory requirements have higher capital requirements?

15. Does a CPO or CTA that qualifies for the enhanced supervisory requirements have to meet capital requirements?

Yes. CPOs and CTAs must meet the requirements imposed by the Interpretive Notice 9021 unless the CPO or CTA asks for, and receives, a waiver from complying with the enhanced capital requirement.   

Back to the Top

Does a CPO or CTA that qualifies for the enhanced supervisory requirements have to meet capital requirements?

16. My firm has qualified and must comply with the enhanced supervisory procedures. How does the promotional material requirement work?

If your firm meets the criteria, it must file all promotional material, as defined in NFA Compliance Rule 2-29(i), with NFA at least 10 days before using the material for the first time. This requirement also applies to all existing promotional material the firm is using at the time the enhanced supervisory requirements become effective. In addition, if your firm is an FCM that guarantees IBs, this requirement also applies to the promotional material used by your firm's guaranteed IBs.

Back to the Top

My firm has qualified and must comply with the enhanced supervisory procedures. How does the promotional material requirement work?
NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
Site Index | Contact NFA | News Center | FAQs | Career Opportunities | Industry Links | Home
© National Futures Association All Rights Reserved. | Disclaimer and Privacy Policy