Compliance Rules

Part 3 - Compliance Procedures

RULE 3-2. INVESTIGATION.

[Effective date of amendments: June 13, 1986; March 15, 1994; March 12, 1999; September 30, 2019 and August 31, 2020.]

(a) Initiation; Report.

In each case in which the Compliance Department has reason to believe that any NFA requirement is being, has been or is about to be violated, the Compliance Department shall submit a written report of the matter to the Business Conduct Committee. (See NFA Bylaw 704.) The report shall include:

(i) the reason the investigation was begun;

(ii) a summary of the complaint, if the investigation was begun as the result of a complaint;

(iii) the relevant facts; and

(iv) the Compliance Department's conclusion whether the Business Conduct Committee should proceed with the matter.

(b) Review of Report.

Each investigation report shall be reviewed by the Business Conduct Committee. If, upon review of the report, the Business Conduct Committee finds that additional investigation or evidence is necessary, it shall so instruct the Compliance Department. Within 30 days after receiving a completed report the Business Conduct Committee shall either:

(i) close the matter, if it finds (A) no reasonable basis that a violation has occurred, is occurring or is about to occur; or (B) that prosecution is otherwise unwarranted (in which case the Business Conduct Committee may issue or cause to be issued a warning letter). The closure order shall be in writing and briefly state the reasons therefor, and a copy of the order shall be promptly furnished to the President. Such order shall become final 10 days after the President's receipt thereof unless, within such time, the President refers the matter to the Appeals Committee (See NFA Bylaw 702) for its review. In such case, the closure order shall become final 30 days after the date of referral by the President unless, within such time, the Appeals Committee directs the Business Conduct Committee to issue a complaint; or

(ii) serve a written and dated Complaint, if it finds reason to believe that an NFA requirement is being, has been or is about to be violated and that the matter should be adjudicated.

No member of the Business Conduct Committee or its designated Panel shall participate in the matter if the member, or any person with which the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).