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NFA helps develop International Regulators Alert System

In today's global marketplace, the number of firms and individuals that conduct business both in their domestic market and in a number of foreign jurisdictions is rising dramatically. Because of this global economy, regulators must be kept informed on a timely basis of the registration status, financial condition and fitness of firms and individuals in foreign jurisdictions that have access to the regulator's domestic market. NFA, in partnership with the CFTC, is developing an International Regulators Alert System to automatically communicate relevant information and alerts to other regulators around the world.

"Regulators are confronted with the challenge of both providing and receiving information concerning firms and individuals operating in an increasing number of jurisdictions," says NFA's Senior Vice-President of Strategic Planning Karen Wuertz.

Sharing information across international jurisdictions is a challenging task. However, NFA has a long history of implementing technological solutions to streamline cumbersome processes. NFA introduced the Disciplinary Information Access Line (DIAL) in 1991. DIAL was the first clearinghouse of disciplinary information about futures firms and salespeople. Using a toll-free number, investors and industry professionals could get information on disciplinary actions taken by NFA, the CFTC and 13 futures exchanges.

NFA moved its extensive database of information online in 1998 when it introduced the Background Affiliation Status Information Center (BASIC). BASIC, which can be accessed through NFA's web site (www.nfa.futures.org), contains current and historical registration information concerning all current and former CFTC registrants. It also provides information concerning disciplinary actions taken by NFA, the CFTC and all the U.S. futures exchanges.

"Both DIAL and BASIC have proven to be very popular and widely used," says Wuertz. "The CFTC approached us to help them develop a system that will provide each regulator with the information they need regarding U.S. registrants that conduct business in other jurisdictions." The new system will incorporate elements of the BASIC system and NFA's new Online Registration System (see the Special Section of this newsletter).

Here's how the new International Regulators Alert System will work. If a U.S. firm is doing business in another jurisdiction, the foreign regulator can request via e-mail all regulatory information relevant to that firm. Once the initial request is made, the system will automatically send the regulator quarterly notices. More urgent information regarding the firm (e.g., withdrawal from membership, disciplinary actions, etc.) will be sent to the regulator immediately.

"The essential goal of the system is to make information sharing an automatic process," says Wuertz. "Foreign firms should not have to wait for some sort of catastrophe to happen in their jurisdiction before making a request for information from the responsible regulator. When a firm withdraws from our membership or has serious financial problems, the system should automatically inform interested foreign jurisdictions."

NFA staff has made presentations about the system at several international regulators meetings, including conferences in Boca Raton, London and Burgenstock. The system has been well received by international regulators and many have expressed the opinion that the system will be a valuable tool that they intend to use.

The International Regulators Alert System is currently in the development stage. Testing is scheduled to occur during the second quarter of 2002, and NFA plans to implement the system in the summer of 2002.

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