A) Explanation of Proposed Amendments to NFA Compliance Rule 3-4(b)
The Commission recently approved amendments to NFA's Compliance Rules to expedite NFA's disciplinary process. During that process, CFTC staff pointed out an inconsistency between NFA Compliance Rule 3-4 and the recent amendments.
NFA Compliance Rule 3-4 spells out certain information that must be included with the Complaint issued by the Business Conduct Committee. In particular, Compliance Rule 3-4 requires NFA to inform the Respondent it has 10 business days to file an Answer and that it must request a hearing or its right to a hearing will be waived. The recently approved amendments extend the time for filing an Answer to 30 calendar days and eliminate a Respondent's duty to affirmatively request a hearing.
As a practical matter, NFA has already changed the language in BCC Complaints to be consistent with the new procedures. Using wording in the Complaint that is different than the wording in the Rule does not prejudice the Respondents in any way since the changes favor Respondents by lengthening the time they have to file an Answer and by giving them a hearing whenever a timely Answer is filed. Nonetheless, Compliance Rule 3-4 should be amended to be consistent with the new procedures.
B) Explanation of Proposed Amendments to NFA Registration Rule 302(d)
As Registration Rule 302 is currently written, NFA may refuse to issue a temporary license ("TL") to a guaranteed Introducing Broker ("GIB") if, among other things, the GIB or any of its principals have answered "Yes" to a disciplinary history question on the Form 8-R. NFA may terminate a TL issued to a GIB if a new principal is added who has "Yes" answers. Additionally, NFA may terminate the TL if the GIB failed to disclose any of its disciplinary history or if the GIB becomes subject to a disciplinary matter after the TL is issued and before registration is granted. However, the rule currently does not allow NFA to terminate the TL if the principals failed to disclose their disciplinary history or if they become subject to a disciplinary action before registration is granted. The proposed amendment to the rule will allow NFA to do so.