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Proposed Rule

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

COMPLIANCE RULES

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Part 2 - RULES GOVERNING THE BUSINESS CONDUCT OF MEMBERS REGISTERED WITH THE COMMISSION

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RULE 2-6. EXPELLED OR SUSPENDED MEMBER OR ASSOCIATE.

No person who has been expelled or suspended or is subject to a similar sanction by NFA in a proceeding brought pursuant to Part 3 of NFA's Compliance Rules that temporarily or permanently prohibits the person from NFA membership or affiliation in any capacity with an NFA Member shall hold himself out as a Member in good standing of NFA, or as affiliated with a member, as the case may be, during the period during which the sanction is in effect. No Member or Associate shall conduct commodity futures or forex business with such a person during the period the sanction is in effect unless authorized by the Business Conduct Committee, Hearing Committee or the Appeals Committee.

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RULE 2-39. SOLICITING, INTRODUCING, OR MANAGING OFF-EXCHANGE RETAIL FOREX TRANSACTIONS OR ACCOUNTS

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RULE 2-40. BULK ASSIGNMENT OR LIQUIDATION OF FOREX POSITIONS; CESSATION OF CUSTOMER BUSINESS.

(a) Bulk Assignment, Transfer, or Liquidation. A Forex Dealer Member may not enter into a bulk assignment, transfer, or liquidation of customer forex positions or accounts unless the assignment, liquidation, or transfer complies with procedures established by NFA.

(b) Obligation of Assignees. If customer forex positions or accounts are assigned or transferred to a Forex Dealer Member, the Member may not accept orders initiating new positions until it has either:

    (1) obtained personal and financial information from the customer and provided the disclosures required under Compliance Rule 2-36; or

    (2) if the assignor was a Forex Dealer Member, obtained the necessary personal and financial information pertaining to the customer from the assignor and obtained reliable written evidence (which may include electronic records) that the assignor provided the required disclosures.

(c) Ceasing Business. A Forex Dealer Member must notify NFA by e-mail or facsimile seven calendar days prior to ceasing its retail forex business.

(d) Definitions. For purposes of this rule, the term "forex" has the same meaning as in Bylaw 1507(b) and the term "customer" has the same meaning as in Compliance Rule 2-36(i).

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CODE OF ARBITRATION

SECTION 1. DEFINITIONS.

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(o) "Futures" - includes:

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    (6) for purposes of jurisdiction under this Code:

      (i) foreign currency futures and options forex transactions when the claim is brought against a Member or Associate who is subject to Compliance Rule 2-39; and

      (ii) forex transactions that are between a Forex Dealer Member and a person that is not an eligible contract participant as defined in Section 1a(12) of the Act. Forex Dealer Members, their employees, and Members and Associates who solicit transactions on behalf of, introduce customers to, or manage accounts for customers that enter into transactions with a Forex Dealer Member are all subject to mandatory arbitration in connection with those transactions.

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INTERPRETIVE NOTICES

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FOREX TRANSACTIONS

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B. COMPLIANCE RULE 2-36

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1. Disclosure - Members must provide forex customers with understandable and timely disclosure on essential features of forex trading.

At or before the time a customer first engages in a forex transaction, a Forex Dealer Member and its Associates should provide the customer sufficient information concerning the characteristics and particular risks of entering into forex transactions. Members and Associates introducing or managing accounts should know what information has been provided and should supplement it when necessary.

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5. Communications with the Public and Promotional Material - No Member or Associate shall make any communication with potential or current retail customers that operates as a fraud or deceit; uses a high-pressure approach; or implies that forex transactions are appropriate for all persons.

Promotional Material used by the Member or Associate shall not:

  • Deceive the public or contain any material misstatement of fact or omit a fact that makes the promotional material misleading;11

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11 Through interpretive notices issued under NFA Compliance Rule 2-29, NFA has provided Members with guidance on what activities are deceptive and misleading. See, for example, NFA Compliance Rule 2-29: Deceptive Advertising, NFA Manual paragraph 9033; NFA Compliance Rule 2-29: Deceptive Advertising, NFA Manual paragraph 9034; Compliance Rule 2-29: High Pressure Sales Tactics, NFA Manual paragraph 9038; and NFA Compliance Rules 2-29 and 2-9: NFA's Review and Approval of Certain Radio and Television Advertisements, NFA Manual paragraph 9039. Although these interpretive notices do not directly apply to off-exchange retail forex activities, the principles included in them with regard to what is deceptive or misleading are equally applicable to those activities.

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