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Proposed Rule

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EXPLANATION OF PROPOSED AMENDMENTS

NFA adopted the Code of Arbitration ("Code") to provide customers with a forum to resolve disputes involving Member and Associate Members that are subject to NFA's regulatory jurisdiction. Section 2(a)(1) of the Code specifically states that NFA's mandatory jurisdiction is limited to claims by customers against Associates and FCM, IB, CPO, CTA and LTM Members of NFA.

In the early 1990s, based upon requests from Members and Associates to have an arbitration forum to resolve disputes among themselves, NFA adopted the Member Arbitration Rules ("Rules"). The Rules were patterned closely after the Code and were designed to provide an arbitration forum for claims involving the same Members and Associates who are subject to mandatory arbitration under the Code.

Recently, NFA received an inquiry from an Associate who wished to file a claim against a contract market Member of NFA. The Rules were never intended to provide a forum for disputes involving contract markets, however. To make this clear, the Board amended the definition of Member in the Rules to specifically state that it does not include contract market Members. This amendment is consistent with Section 2(a)(1) of the Code and provides that under the Rules a claim against a Member is mandatory only if brought against an FCM, IB, CPO, CTA or LTM.

Both the Code and Rules currently require arbitration demands and answers to include an attestation that the undersigned certifies that the statements set forth in the pleadings are true and correct. Recently, an attorney representing a respondent indicated that he was uncomfortable including the attestation in an answer because he was signing the answer based on information provided by his client and the attestation did not indicate that he was certifying its accuracy to the best of his knowledge, information and belief. The issue does not arise at the demand stage because the claimant is required to sign the demand. The Code and Rules, however, permit an attorney to sign responsive pleadings. Therefore, the Board amended Section 6 of the Code and Section 5 of the Rules to allow attorneys to attest that the statements set forth in the pleadings are true and correct to the best of the signer's knowledge, information and belief, formed after a reasonable inquiry.

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