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EXPLANATION OF PROPOSED AMENDMENTS
A) Explanation of Proposed Amendments to Compliance Rule 3-3:
As is the case with disclosure document filings and financial filings, the proposed amendments to Rule 3-3 will allow respondents in NFA Business Conduct Committee ("BCC") cases to file their pleadings with NFA by attaching the pleading as a word processing document to an e-mail to NFA. NFA does not intend to establish specific requirements for the format of the attached document except that the pleading must be in a form that NFA's word processing software can read. After receiving an electronically filed document, NFA staff will generate a paper version of the document and place it in the litigation file along with a diskette containing the electronic document.
NFA envisions this system as permissive rather than mandatory. That is, respondents may but would not be required to file and serve pleadings electronically. Similarly, NFA may but would not be obligated to serve its pleadings electronically. NFA would continue to serve the complaint in traditional ways in accordance with the current rules. Furthermore, neither NFA nor respondents would be able to force other respondents to accept service by e-mail. Instead, respondents who file pleadings electronically would be deemed to have consented to service by e-mail.
Although pleadings are rarely used either as evidence at BCC hearings or in collateral proceedings, occasionally the need to use or admit pleadings into evidence may arise. In that instance, issues unique to electronic records will be presented. However, NFA staff believes that most if not all of the issues regarding admissibility of the electronically filed documents can be eliminated by a limited waiver of objections from the respondent to their use and admissibility. The proposed amendments address this issue and state that if respondents opt to file pleadings electronically, the respondents will, by rule, be deemed to have waived any objection based on authenticity or genuineness to the use and admissibility of the electronically filed pleadings in the NFA proceeding. NFA would notify respondents of the electronic filing option with the complaint, including the deemed consent to service and the limited waiver of objections to use of the pleadings attendant to filing electronically.
B) Explanation of Proposed Amendments to NFA Financial Requirements Section 3 and Schedule D and Proposed Adoption of an Interpretive Notice Concerning FCM and IB Filing Requirements:
To conform with CFTC requirements, the proposed amendments to NFA Financial Requirements Section 3 and Schedule D require any unaudited financial report filed by an FCM or an IB not operating pursuant to a guarantee agreement to be filed with NFA within 17 business days after the date the report was made. Currently, various unaudited financial reports are required to be filed within 30 to 45 business days of the report. The new filing requirement would become effective on June 30, 1997. However, to acclimate FCMs and IBs to the new filing deadline, NFA would grant a phase-in period, allowing all unaudited financial reports as of a date from June 30, 1997 through December 31, 1997 to be filed within 30 days after the date of the statement. The proposed interpretive notice announces the new filing requirements and the phase-in period.
The proposed amendment to Schedule D modifies the calculation of debt-equity ratio in that the debt-equity total must now equal all satisfactory subordinated loan agreements plus all owners' equity. Currently, excess net capital is deducted in arriving at the required debt-equity total. FCM and IB Members would be required to use this new calculation effective June 30, 1997.