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News Facts Actions - Winter 2010

In this issue:

NFA confirms panelists for CPO/CTA Regulatory Seminar

NFA recently announced an initial list of confirmed panelists for its CPO/CTA Regulatory Seminar on March 2, 2010 in Chicago. The seminar will focus on several CPO/CTA issues, including new and pending legislation, recent additions to financial reporting requirements and common errors made in promotional material and disclosure documents. The seminar will also outline the NFA audit process and discuss common audit deficiencies.

In addition to NFA staff, the panels for each session will feature individuals representing law firms, NFA Member firms, public accounting firms and other futures industry professionals. The current list of panelists includes:

  • Roxanne Bennett, Director, Price Asset Management
  • Patricia Cushing, Associate Director, Compliance, NFA
  • Dan Driscoll, Executive Vice-President and COO, NFA
  • David Kavanagh, President, Dearborn Capital Management
  • James W. Laures, Director, Deloitte & Touch LLP
  • John Lothian, President & CEO, John J. Lothian & Company, Inc.
  • Matthew Pendell, Manager, Compliance, NFA
  • Natalie Peters, Director of Investor Relations, DigiLog Capital LLC
  • Thomas Sexton, Senior Vice-President and General Counsel, NFA
  • Jennifer Sunu, Director, Audits, NFA
  • Lisa Tamburini, General Counsel, Alphametrix LLC
  • David Young, President, Spectrum Global Fund Administration, LLC
  • Lance A. Zinman, Partner, Katten Muchin Rosenman LLP

The fee for attending this seminar is $100 per person for NFA Members and $150 for non-Members. The fee includes all seminar sessions, continental breakfast, refreshment breaks and lunch.

Individuals can register online if they are using a major credit card. Individuals can also register by downloading the registration form and mailing it with a check or money order to: National Futures Association, CPO/CTA Regulatory Seminar, 300 S. Riverside Plaza, Suite 1800, Chicago, IL 60606. Please make checks payable, in U.S. funds, to National Futures Association. Payment must be made at the time of registration.

The seminar will be held at the UBS Conference Center, located on the second floor of the UBS building, One North Wacker Drive in Chicago. For more information on the seminar, click here

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NFA addresses the issue of Member use of online social networking with rule amendment and interpretive notice

On February 1, 2010, NFA will put into effect a new amendment to Compliance Rule 2-29(h) regarding a Member's use of audio or video advertisements distributed through media accessible to the public. If the audio podcasts and videos on the Internet make specific trading recommendations or refer to profits that have been obtained in the past or can be achieved in the future, the Member must submit them to NFA for approval ten days prior to use. In this way, the amendment subjects certain online advertising to the same requirements as similar radio and television advertising.

The rule amendment is just one of the steps NFA has taken recently to address the growing use of social networking groups such as blogs, chat rooms and forums to communicate with and solicit customers.

The use of online social networking through websites such as Facebook, Twitter and LinkedIn began primarily as a way for individuals to share common interests. However, more recently organizations ranging from large corporations to small businesses are turning to online social networking as an opportunity to expand their markets and solicit new customers.

In December 2008, NFA's FCM, IB and CPO/CTA Advisory Committees met to discuss the growing use of social networking groups in the futures industry. The outcome of each of these meetings was a request for NFA to issue written guidance reminding Members of their responsibilities in connection with these online communications.

"We began preparing a new interpretive notice to address social networking issues," said NFA's General Counsel Tom Sexton. "As part of the process, we reviewed FINRA's response to the same issue. FINRA states that blogs and bulletin boards are considered advertisements and are subject to the same requirements as other advertisements. FINRA also reminds their members of their supervisory responsibilities in relation to online communications."

The interpretive notice, titled "Use of On-Line Social Networking Groups to Communicate with the Public," discusses a Member or Associate's responsibilities in connection with electronic communications, including developing procedures for employee use of social networking and outlining the steps the Member should take to supervise and enforce whatever policies it adopts. The interpretive notice makes clear that online communications are subject to the same standards as other types of communications with the public and provides guidance to Members to meet their responsibilities in this area.

The interpretive notice was approved by NFA's Board of Directors on November 19, 2009 and became effective on December 24, 2009.

To provide further guidance for its Members, NFA has produced a podcast that is available on NFA's website.

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NFA reminds firms to complete Annual Questionnaire regarding their futures/forex-related business

Every month, more than 100,000 background searches are conducted on futures industry firms and individuals through NFA's online Background Affiliation Status Information Center (BASIC). Investors, NFA Members, the media and other interested individuals use BASIC to verify registration status and research what enforcement actions (if any) have been taken against a firm or individual.

In the near future, BASIC will begin displaying information that will reflect whether or not firms are actively engaged in futures and/or forex-related business activity. In order for a firm to avoid being listed as "inactive", all Member firms must complete new questions related to their business in their Annual Questionnaire. 

If the questions are not answered, the answers will default to "no activity", which is what will be displayed in BASIC, as illustrated below.

BASIC Screen Details

"Although we have sent two notices to our Members alerting them to this new requirement, there are still Members who are actively conducting business but have not completed the questionnaire," said NFA's Sr. Vice-President of Compliance Regina Thoele.

For additional information and instructions on accessing the Annual Questionnaire, click here.

If you have any questions, please contact NFA's Information Center at 800-621-3570 or 312-781-1410.  

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Board Actions

The following actions were taken by NFA's Board of Directors at their meeting on November 19, 2009. 

The Board approved amendments to NFA's Interpretive Notice titled "Forex Transactions" to correspond to changes to NFA Bylaw 1301(e) imposing a flat $12,000 surcharge on dues for exchange-member Forex Dealer Members where their DSRO has agreed to examine them for compliance with applicable NFA forex rules. The amendments became effective on December 17, 2009. 

The Board appointed the following individuals to serve on the Hearing Committee: James A. Gary, Mark J. Hawley, Lou Illes, Douglas O. Kitchen, David M. Kozak and Frederick G. Uhlmann. 

The Board appointed Michael A. Di Benedetto to the FCM Subcommittee of the 2010 Nominating Committee for a term to expire in February 2011. 

The Board approved an amendment to the Interpretive Notice titled "NFA Compliance Rules 2-7 and 2-24 and Registration Rule 401: Proficiency Requirements for Security Futures Products" to extend the relief for registrants wishing to engage in security futures activities from having to take an exam. In lieu of an exam, registrants can complete a training program developed jointly by NFA and FINRA (previously NASD). The relief will be extended to December 31, 2012. The amendment became effective on December 28, 2009. 

The Board approved an amendment to Financial Requirements Section 15 regarding FDM internal financial controls. The amendment eliminates the specific requirement for an internal control report prior to acting as an FDM and replaces it with a more general requirement that the FDM must demonstrate that it has adequate internal financial controls. The amendment became effective on December 17, 2009. 

The Board approved amendments to NFA Compliance Rule 2-29(h) and a new Interpretive Notice titled "Use of On-Line Social Networking Groups to Communicate with the Public." (See separate story.)

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News Briefs

NFA launches two new podcasts
Two new podcasts are now available on NFA's website to help NFA Members understand their regulatory responsibilities.

"Use and Supervision of Online Social Networking Communications" discusses the application of NFA Compliance Rules to new and emerging forms of web-based promotional material. The podcast focuses on social networking websites, blogging, tweeting and video sharing.

 "Tips for Using NFA's Electronic Disclosure Document Filing System" discusses common errors made by CPOs and CTAs when filing disclosure documents electronically with NFA and how to correct them.

NFA provides investor education at New York Traders Expo
NFA is sponsoring an information booth at the New York Traders Expo on February 14-16 at the Marriott Marquis Hotel. NFA staff will distribute copies of NFA's investor education materials and demonstrate how to conduct a background check of a futures firm or individual using NFA's web-based Background Affiliation Status Information Center (BASIC).

The Expo offers educational seminars and workshops as well as an exhibit hall featuring trading software providers, futures and options exchanges and other vendors. In previous years, the Expo has attracted more than 6,000 traders. For more information visit the Expo's website at

NFA officers to participate in Thought Leadership Summit
NFA's Executive Vice-President and COO Dan Driscoll, General Counsel Tom Sexton and Sr. Vice-President of Compliance Regina Thoele will be participating in the Annual Spring Asset Management Thought Leadership Summit sponsored by the Regulatory Compliance Association. The one-day event will be held on April 19, 2010 at the Marriott Marquis Hotel in New York City.

Panel discussions will be held on a variety of topics, including "Systemic Risk in the New Regulatory Structure", "Compliance Programs and Examinations" and "Emerging Issues in Due Diligence Process and Practice."

For more information, click here.

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