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May 23, 1996
NFA Compliance Rule 2-29 governs communications between NFA Members and the public. Among other things, the rule prohibits the use of promotional material which is misleading or deceptive. The Board's purposes in adopting this rule were to protect the public from fraudulent advertising and sales solicitations and to provide Members with specific guidance on the standards by which their promotional material would be judged.
Recently, a relative handful of Members have used strikingly similar promotional materials, usually in the form of radio or television advertising, which clearly violate both the letter and the spirit of NFA Compliance Rule 2-29. The core problem with all of these promotional materials is that they suggest the strong likelihood that customers will reap dramatic profits by investing with the Member firm when, in fact, nothing in the Member's experience provides any basis for those claims. Typically, these commercials employ a variety of techniques to mislead the public:
Each of the practices described above presents a distorted and misleading view of the likelihood of customers earning dramatic profits by investing with the Member firm, and each of these practices represents a clear violation of NFA sales practice rules. For those few firms which engage in such practices, the Board wishes to reiterate that Members may not engage in a pattern of advertising or solicitation which makes reference to dramatic profits which could be achieved in the future or could have been achieved in the past by trading futures or options contracts for a particular commodity or in the futures or options markets in general unless the Member can demonstrate to NFA that, based on the past performance of its customers, those claims are not misleading.
Any Member making the types of claims referred to above must be able to demonstrate to NFA upon request that the actual performance of its customers supports those claims. Failure to provide adequate documentation will constitute prima facie evidence that the promotional material is misleading.