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Security Futures Products: Proficiency Requirement Update

The Commodity Futures Modernization Act of 2000 amended the Securities and Exchange Act of 1934 to require NFA to "have rules that ensure that members and natural persons associated with members meet such standards of training, experience and competence necessary to effect transactions in security futures products and are tested for their knowledge of securities and security futures products." NFA, the New York Stock Exchange (NYSE) and NASD Regulation (NASDR) are jointly developing proficiency testing for securities futures products.

In the future, the Series 3 examination will include questions relating to security futures products. The Series 30 (Branch Office Manager) examination will also include questions regarding security futures products for persons who are designated security futures principles under NFA Compliance Rule 2-7(b). NASDR and the NYSE are coordinating efforts to implement the proficiency testing requirements for securities industry registrants.

Current registrants and future registrants that pass either the Series 3 or Series 7 and become registered no later than six months after the first retail, exchange-traded contract begins trading can satisfy their proficiency requirements for security futures by taking any training program that covers the subject matter included in a content outline that is being jointly developed by NFA and other self-regulatory organizations. A copy of that outline will be made available on NFA's web site.

NFA and NASDR are in the process of jointly developing a free, web-based training program that will satisfy the training requirement. The Institute for Financial Markets (formerly known as the Futures Industry Institute) was hired to develop the content of this training program. The program will contain five training modules covering issues relating to futures, stock and stock options, security futures products, regulation of security futures and supervision. Depending on an individual's registration status (Series 3 and/or 7), individuals may be able to waive out of the two modules covering futures and stock and stock options. Only designated security futures principals are required to take the supervision module.

An individual registrant must complete the training prior to soliciting or accepting orders for security futures. NFA Members and Associates are not required to notify NFA that they have completed a training program. However, Members should be able to demonstrate to NFA that those registered individuals who are engaging in security futures activities have completed the necessary training.

NFA expects to launch the training program at least six weeks prior to the first day of retail trading of security futures products.

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
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