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Explanation of Proposed AmendmentsA) Explanation of Proposed Amendment to NFA Bylaw 1301
When NFA amended its Articles of Incorporation and Bylaws last year to implement NFA's new Board structure, one of the changes eliminated category voting on dues and assessments. Instead, the Articles now require that a two-thirds majority of the directors present and voting must approve amendments to Bylaws regarding dues and assessments. The last sentence of Bylaw 1301, however, still refers to the now repealed category voting section of the Articles. A technical amendment to Bylaw 1301 refers to the super-majority voting provision.
B) Explanation of Proposed Amendments to NFA's Code of Arbitration and Member Arbitration Rules
On August 10, 2001, the CFTC amended Rule 180.3 by relocating it and renumbering it as Rule 166.5. That Rule, which deals with pre-dispute arbitration agreements between customers and FCMs, IBs, CPOs, CTAs and their associates, is referenced in two places in NFA's Code of Arbitration ("Code"). Technical amendments to Sections 2 and 3 of the Code are proposed to refer to the correct Commission Rule.
The Board also adopted a technical amendment to add "Arbitration Claim" to the definition sections of the Code and the Member Arbitration Rules ("Rules"). This amendment will avoid confusion with other types of claims when interpreting the Code and Rules.
C) Explanation of Proposed Amendments to NFA Compliance Rule 2-24 and Registration Rules 401(h), 701(c)(6) and 802(a), (b) and (d) and Proposed Deletion of Interpretive Notices
Compliance Rule 2-24 requires an NFA Member to ensure that its associated persons ("AP") satisfy the proficiency requirements contained in Registration Rule 401. As it currently exists, Rule 2-24 also requires that the Member and AP abide by the limitations on the AP's activities that were included in any certification filed to satisfy the proficiency requirements. Registration Rule 401 was previously amended to eliminate the use of certifications and Rule 2-24 needs to be amended accordingly.
Registration Rule 401(h) provides that the submission of false information in an application for registration concerning proficiency requirements may constitute grounds for denial of registration. The staff of the Commission's Office of General Counsel ("OGC") requested NFA to amend Rule 401(h) to explicitly include omissions of material information as well as false statements as a basis for denial.
Registration Rule 701(c)(6) provides that NFA may produce non-public portions of registration records with the consent of various Commission staff members. Commission OGC staff requested NFA to amend Rule 701(c)(6) to modify the list of Commission staff members who are authorized to give the necessary consent.
Registration Rule 802 contains the agreements, certifications, and so on that are made when registration forms are filed electronically. The proposed amendments to subsections (a), (b) and (d) add language that previously existed in hardcopy registration applications and clarify that by virtue of the application being filed electronically, the applicant makes an explicit agreement to cooperate with NFA as part of the application process. In addition, Commission OGC staff requested NFA to amend subsection (d)(1) to make the language internally consistent with the other subsections.
When the Board approved rule amendments in May to implement NFA's Online Registration System, it also repealed certain Registration Rules to conform to changes that the Commission made relating to ethics training requirements. Therefore, the NFA interpretive notices concerning the criteria for obtaining approval as an ethics training provider and the procedures for being removed from the list of approved ethics training providers are being eliminated as they are also no longer pertinent.