Proposed Rule

Explanation of Proposals

The proposals contained herein are intended to ensure that NFA is in compliance with new CFTC Regulation 1.69 which requires self-regulatory organizations to adopt rules prohibiting governing board, disciplinary committee and oversight panel members from deliberating or voting on certain matters where the member has a relationship with a named party.

Currently, NFA's rules prohibit a committee member from participating in any membership responsibility, disciplinary or registration action if the individual or a person with whom the individual is connected has a personal, financial, or other direct interest in the matter. The portion of CFTC Regulation 1.69 which applies to NFA is consistent with that basic approach. The new regulation, however, describes in greater detail the types of relationships which a Board or committee member could have with a "named party in interest" which could create a conflict of interest. Proposed new NFA Bylaw 516 and the amendments to NFA Bylaw 708, NFA Compliance Rules 3-2, 3-9, 3-13 and 3-15, and NFA Registration Rule 501 incorporate the requirements of CFTC Regulation 1.69 by reference.