CFTC approves amendments to NFA's Interpretive Notice regarding CTA performance reporting and disclosure
The CFTC has approved amendments to the Interpretive Notice to NFA Compliance Rule 2-34 regarding performance reporting and disclosures. The amendments, which became effective May 1, 2004, allow CTAs to use the "only accounts traded" (OAT) method to account for additions and withdrawals. Using this method, CTAs can temporarily exclude accounts from the rate of return (ROR) calculation if they meet one of the following conditions:
The amendment also makes it clear that Members are not required to use this method but can use any method authorized by the CFTC, including the methods described in Appendix B to the CFTC's Part 4 Regulations.
- The account was opened or closed during the reporting period;
- The account had no open positions or activity because the account had not yet been approved for trading or the client intended to-and did not-close the account shortly after the reporting period ended; or
- The account had net additions and withdrawals in excess of the account's beginning net nominal account value for the period.
NFA revises Self-Examination Checklist
NFA has revised the Self-Examination Checklist that Members must use to conduct an annual review of their operations (NFA Compliance Rule 2-9). Responding to feedback from Members, NFA has divided the checklist into five sections. The first section is a general checklist that should be used by all registration categories. In addition, NFA has developed a separate supplemental checklist for each of the four registration categories (FCM, IB, CPO and CTA). NFA Members should complete each checklist that is applicable to their registration status.
NFA developed the checklist to help Members recognize potential problem areas and alert them to procedures which need to be revised or strengthened. The checklist focuses on the Member's regulatory responsibilities and solicits information regarding whether the Member's internal procedures are adequate for meeting these responsibilities.
Members can download the Self-Examination Checklist from NFA's Web site (www.nfa.futures.org/compliance/selfexam.asp) or request a published version by calling NFA's Information Center at (800)-621-3570.
NFA officer chairs subcommittee to review Customer Type Indicator codes
Senior Vice President of Compliance Yvonne Downs is chairing a subcommittee created by the Joint Compliance Committee to review existing Customer Type Indicator (CTI) codes used by the exchanges. CTI codes are one of the items firms report as part of the audit trail of each contract market. CTI codes classify the type of person who is executing a trade, such as a person trading for his or her own account or someone who is trading for his or her clearing member's house account.
There are currently four CTI codes. However, as the industry has become more electronic over the past few years, the persons executing trades no longer fall neatly into one of the existing categories. The subcommittee's goal is to reach a consensus on the number and definition of CTI codes used by the industry.
NFA publishes new investor education brochure
NFA recently published a new brochure designed to help investors conduct online background checks of futures firms and brokers using its Background Affiliation Status Information Center (BASIC), located on NFA's Web site. The BASIC brochure lists the types of information available in the system, describes how to conduct a BASIC search and provides additional education resources for the investing public.
"NFA Members, investors and other industry participants conducted more than 600,000 BASIC searches last year," says Karen Wuertz, senior vice president of Strategic Planning and Communications. "However, we know there are still individuals who do not know about BASIC and who would benefit from using it. That's why we developed this brochure."
NFA introduced the brochure at the Traders Expo in Chicago on June 24-26. NFA's Director of Communications and Education Larry Dyekman also gave an educational presentation describing "What You Need to Know before Trading Futures."
"Our new BASIC brochure and our participation at conferences targeted at individual investors are part of our continued efforts to enhance our investor education program," says Dyekman.
Individuals can download the BASIC brochure from NFA's Web site (www.nfa.futures.org) or request a hard copy of the brochure by calling NFA's Information Center at (800) 621-3570.
Speaking of NFA...
The following NFA staff members were featured at industry-related conferences during the 2nd quarter of 2004:
Michael Piracci, associate director of Compliance in New York, participated in a panel discussion called "Ask Your Regulator" at the Futures Industry Association's OpTech Conference on April 20 in New York City.
Patricia Cushing, associate director of Compliance in Chicago, served as a panelist discussing "Critical Issues of Today" at the "Examining the Latest Business Continuity and Disaster Recovery Issues for Hedge Funds" seminar, sponsored by the Managed Funds Association. The seminar was held on May 11 in New York.
Five NFA staff members participated in various panels at the FIA's 2004 Law and Compliance meeting in Baltimore in May. General Counsel Tom Sexton spoke on an "Introductory Futures and Securities" panel and a second panel discussing "Asset Management Issues." Assistant General Counsel Carol Wooding presented an update on recent developments in anti-money laundering compliance. Senior Vice President of Compliance Yvonne Downs discussed new compliance issues facing FCMs. Michael Piracci participated in a panel discussion called "Foreign Exchange: Suitability and Documentation" and Patricia Cushing was one of the panelists discussing "Operational Risk: The Implications for Futures."
Senior Vice President of Strategic Planning and Communications Karen Wuertz attended the IOSCO annual meeting in Amman, Jordan in May. She participated in a panel discussion of demutualization and governance of exchanges and presented a draft paper titled "Self-Regulation in the Financial Markets" that was developed by NFA and the Investment Dealers Association located in Toronto, Canada.