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Proposed Rule

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PROPOSED AMENDMENTS
(additions are underscored and deletions are stricken through)

BYLAWS

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BYLAW 301. REQUIREMENTS AND RESTRICTIONS

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(g) Denial and Revocation.

(i) If the President has reason to believe that:

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    (3) the person has submitted an intentionally incomplete, inaccurate or otherwise false application to NFA for membership or registration as an Associate, the President shall promptly so notify the person in writing and furnish a copy of the notice to the Membership Committee, setting forth the specific grounds for the determination. The person shall be given an opportunity to show to the President that the qualifications are met, or that the application is not intentionally incomplete, inaccurate or false. If the person requests, or if the Membership Committee orders, a hearing shall be held before the Membership Committee or its designated Subcommittee, and a record shall be kept. Such designated Subcommittee shall consist of at least three members of the Membership Committee, at least one of whom shall not be an NFA Member or an Associate or an employee of an NFA Member. Each member of the designated Subcommittee shall be appointed by a majority of the Membership Committee. The person may be represented at the hearing, and submit evidence in the proceeding, call and examine witnesses, examine the evidence upon which the President's determination was based, and, in the discretion of the Membership Committee or its designated Subcommittee, present written or oral argument. No member of the Membership Committee or a designated Subcommittee shall participate in a membership action if the member, or any person with whom the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).

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BYLAW 701. MEMBERSHIP COMMITTEE.

There shall be a Membership Committee, consisting of five Directors and four other persons, at least one of whom shall not be an NFA Member or an Associate or an employee of an NFA Member. A majority of the Committee members eligible to participate in a proceeding shall constitute a quorum, except that in cases in which a Subcommittee has been designated a quorum shall consist of a majority of such Subcommittee members but no fewer than three. The Committee members shall be proposed by the President and appointed by the Board. The President and the Board shall endeavor to propose and appoint Directors and persons who reflect the various categories of Members described in the Articles. The Committee or its designated Subcommittee shall review actions taken by the President pursuant to the President's authority under Chapter 3 to make the initial determination regarding:

    (a) applicants for membership in NFA or registration as Associates, and
    (b) continued eligibility for such membership or registration.

Each Committee member shall serve for two years, except for the Committee members appointed at the Board's regular annual meeting in 2002, whose terms shall be staggered, or until the member's successor is appointed and qualified, or until the member's death, resignation, ineligibility or removal. A Committee vacancy shall be filled in the manner prescribed in Bylaw 601 for officers. A Committee member may be removed by the Board whenever in its judgment the best interests of NFA will be served thereby for cause.

BYLAW 702. APPEALS COMMITTEE.

There shall be an Appeals Committee, consisting of five Directors, at least one of whom shall be a Public Director and not more than three of whom shall represent FCMs, IBs, and CPO/CTAs. A majority of the Committee members eligible to participate in a proceeding shall constitute a quorum. The Committee members shall be proposed by the President and appointed by the Board. The President and the Board shall endeavor to propose and appoint Directors who reflect the various categories of Members described in the Articles. The Committee shall hear and decide appeals from and reviews of decisions in disciplinary cases by the Business Conduct Committee or the Hearing Committee under the Compliance Rules. Each Committee member shall serve for two years, except for the Committee members appointed at the Board's regular annual meeting in 2002, whose terms shall be staggered, or until the member's successor is appointed and qualified, or until the member's death, resignation, ineligibility or removal. A Committee vacancy shall be filled in the manner prescribed in Bylaw 601 for officers. A Committee member may be removed by the Board whenever in its judgment the best interests of NFA will be served thereby for cause.

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BYLAW 704. BUSINESS CONDUCT COMMITTEE.

There shall be a Business Conduct Committee, consisting of nine individuals who shall be Members, persons connected therewith or members of the public. A majority of the Business Conduct Committee members eligible to participate in a proceeding shall constitute a quorum, except that in cases in which a Panel has been appointed (See Compliance Rule 3-11) a quorum shall consist of a majority of such Panel members but no fewer than three. The members of the Business Conduct Committee shall be proposed by the President and appointed by the Board. The President and the Board shall propose and appoint individuals who reflect the various categories of NFA Members and NFA Regions (See Article V) and members of the public. At least one three members of the Business Conduct Committee shall not be an NFA Members or Associates or employees of NFA Members. Each member of the Business Conduct Committee shall serve for three years, except for members of the initial Business Conduct Committee, whose terms shall be staggered, or until the member's death, resignation, ineligibility or removal. A vacancy in the Business Conduct Committee shall be filled in the manner prescribed in Bylaw 601 for officers. A Business Conduct Committee member may be removed by the Board whenever in its judgment the best interests of NFA will be served thereby for cause. No Business Conduct Committee member shall use or disclose material, non-public information, obtained as a result of participation on the Business Conduct Committee, for any purpose other than the performance of official duties as a member of the Business Conduct Committee.

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BYLAW 707. HEARING COMMITTEE.

There shall be a Hearing Committee, consisting of at least 15 individuals who shall be Members, persons connected therewith or members of the public. A majority of the Hearing Committee members eligible to participate in a proceeding shall constitute a quorum, except that in cases in which a Panel has been appointed (See Compliance Rule 3-7) a quorum shall consist of a majority of such Panel members but no fewer than three. The members of the Hearing Committee shall be proposed by the President and approved by the Board. The President and the Board shall propose and appoint individuals who reflect the various categories of NFA Members and NFA Regions and members of the public. At least one-third of the members of the Hearing Committee shall not be an NFA Members or Associates or employees of NFA Members. Each member of the Hearing Committee shall serve for three years, except for members of the initial Hearing Committee, whose terms shall be staggered, or until the member's death, resignation, ineligibility or removal. A vacancy in the Hearing Committee shall be filled in the manner prescribed in Bylaw 601 for officers. A Hearing Committee member may be removed by the Board whenever in its judgment the best interests of NFA will be served thereby for cause. No Hearing Committee member shall use or disclose material, non-public information, obtained as a result of participation on the Hearing Committee, for any purpose other than the performance of official duties as a member of the Hearing Committee.

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COMPLIANCE RULES

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PART 3 - COMPLIANCE PROCEDURES

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RULE 3-17. COMPOSITION OF COMMITTEES.

The Business Conduct Committee, Hearing Committee, Appeals Committee, Executive Committee, BCC Panel and Hearing Panel conducting a proceeding under these Part 3 rules shall include:

(a) at least one member who represents a membership category (See Article VI) other than the Respondent's membership category, and

(b) at least one member who is not an NFA Member or Associate or an employee of an NFA Member whenever the Respondent is a member of NFA's Board of Directors, the Business Conduct Committee, Hearing Committee or Appeals Committee. When selecting Hearing Panels, the Chairman of the Hearing Committee or his designee shall endeavor to appoint panelists with diverse interests.

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REGISTRATION RULES

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PART 500. PROCEEDING TO DENY, CONDITION, SUSPEND AND REVOKE REGISTRATION

RULE 501. AUTHORITY TO DENY, CONDITION, SUSPEND AND REVOKE REGISTRATION.

NFA may refuse to register or register conditionally any person registered or applying for registration as an FCM, IB, CPO, CTA, LTM, ATM, as an AP of any of the foregoing, or as a floor broker or floor trader, or suspend or revoke the registration of any registrant in those categories, based upon the standards of fitness set forth in the Act. Interim Orders and Final Orders denying, revoking, conditioning, or suspending registration shall be made by the Membership Committee or a designated Subcommittee in accordance with the procedures set forth in Part 500 of these Rules. Such designated Subcommittee shall consist of three members of the Membership Committee for all categories except floor brokers and floor traders. The designated Subcommittee for floor brokers/floor traders shall consist of at least three persons, the majority of whom are members of the Membership Committee and the remainder of whom are registered floor brokers or floor traders approved by NFA's Board of Directors to be a member of such Subcommittee. At least one member on each designated Subcommittee shall not be an NFA Member or an Associate or an employee of an NFA Member. In cases submitted by the President to the Membership Committee or a designated Subcommittee, registration shall not be granted pending a final determination by the Membership Committee or a designated Subcommittee. No member of the Membership Committee or a designated Subcommittee shall either review a registration matter or participate in a registration action if the member, or any person with whom the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).

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