NFA annually sends questionnaires to all of its Members (except FCMs for which NFA is not the DSRO) seeking certain basic information about their futures business. The Compliance Department uses that information in a number of ways, including the scheduling of audits. For the most part, firms submit the completed questionnaires, but not always. NFA estimates that about 10 percent of the firms fail to respond to the questionnaire.
To reduce the number of non-responsive firms, NFA has already instituted procedural changes. Rather than send the questionnaires to all the firms at one time, NFA recently began sending them in conjunction with the firms' annual registration update cycle. NFA also adds points in the audit priority system to firms that do not respond. Nonetheless, during its last rule enforcement review of NFA's Compliance Department, the Commission recommended that NFA develop procedures to ensure that there are negative consequences for firms that fail to file their annual compliance questionnaires.
The Board determined to amend its Bylaws to provide that a firm's failure to return a completed questionnaire will be deemed a request to withdraw the firm's NFA membership. This is a relatively straightforward, self-executing process that does not require a great expenditure of NFA resources. It is also one that the Members should be generally familiar with since the annual registration update process operates on the same principle.
As the Commission is aware, CFTC staff recently requested that NFA amend the Telemarketing Requirements imposed by NFA Compliance Rule 2-9 and its Interpretive Notice so that the tape retention requirement parallels the Commission's general recordkeeping requirements. Essentially, this would require firms subject to the taping requirement to keep the tapes "readily accessible" for two years and forbid the destruction of tapes for five years. NFA's Board agreed with the Commission's recommendation and determined to amend the Telemarketing Requirements accordingly.