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NFA to increase number of non-Members serving on disciplinary and registration/membership committees
The CFTC recently approved amendments to NFA Bylaws and Rules that will formally require public involvement in NFA's disciplinary and membership processes. The amendments become effective on January 1, 2005.
"We've always had safeguards in place to ensure that our disciplinary process is fair and impartial," says General Counsel Tom Sexton. "These amendments will help us strengthen those safeguards."
NFA Bylaw 704 provides that the Business Conduct Committee (BCC) shall consist of nine individuals, and NFA Bylaw 707 proves that the Hearing Committee shall consist of at least 15 individuals. Both bylaws provide that at least one member "shall not be an NFA Member or Associate."
"In practice, however, the non-Member representation is much greater than that required by these two Bylaws," says Sexton.
The BCC is currently composed of six Member representatives and three non-Member representatives. The Hearing Committee is composed of 21 Member representatives and 17 non-Member representatives.
"The Bylaw amendments codify our current practice by requiring that at least two-thirds of both committees be non-Member representatives and by including employees of NFA Members as Member representatives," says Sexton.
Virtually all of the same safeguards that protect the fairness and impartiality of the disciplinary process apply to the registration and membership process. However, unlike the disciplinary process, there is no requirement that at least one member of the Membership Committee or a Designated Subcommittee be a non-Member of NFA, although in practice the Membership Committee has included a non-Member Director.
To accomplish its work, the Membership Committee divides into three-person Designated Subcommittees to conduct hearings and consider settlement offers. To ensure uniformity in treatment of similarly situated applicants, the Membership Committee meets quarterly to review the activities of these Designated Subcommittees. The amendment to Bylaw 701 requires at least one member of the Membership Committee to be a non-Member, and the amendment to Registration Rule 501 requires at least one member of each Designated Subcommittee be a non-Member.
"We have also made several technical amendments to various rules to eliminate outdated references to NFA regions and to the terms of the original committee members," says Sexton. "Additionally, we have amended NFA Bylaw 301, which governs membership proceedings, to make it consistent with the rules governing the registration process."