Proposed Rule

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EXPLANATION OF PROPOSED AMENDMENTS

In November 2001, NFA's Board approved an Interpretive Notice allowing current registrants to qualify to engage in security futures activities by taking a training program instead of a test. The Interpretive Notice initially provided for a six-month window after security futures products (SFPs) began trading, and the Notice was subsequently amended-as were NASD's rules-to extend that window until December 31, 2006.

Initially, both NFA and NASD anticipated developing tests for new registrants. In the meantime, we jointly developed a web-based training program that complies with the training requirement. To date, just over 13,000 individuals have completed that program. Approximately 9,000 of these individuals were registered with full broker-dealers (some of which are also FCMs), and approximately 4,000 were registered with futures-only firms. The vast majority completed the training within a year after NFA began offering it.

Only 180 individuals completed the training in the first eight months of 2006. The web-based training program is easy to maintain, while developing and adopting a test would be much more resource-intensive. Based on the small number of new individuals who desire to sell these products and the fact that SFPs are lightly traded, NFA and NASD staff have concluded that developing and adopting tests at this time is not cost-effective. The SEC agreed to extend the current provisions substituting training for testing until December 31, 2009; and CFTC staff concurred.

As mentioned earlier, NFA is invoking the "ten-day" provision of Section 17(j) of the Commodity Exchange Act. NFA intends to make the amendments to the Interpretive Notice regarding SFP proficiency training effective ten days after receipt of this submission by the Commission, unless the Commission notifies NFA that the Commission has determined to review the proposal for approval.

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