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November 26, 1996
Ms. Jean A. Webb
RE: NATIONAL FUTURES ASSOCIATION: PROPOSED AMENDMENT TO NFA REGISTRATION RULE 203(A) AND ADOPTION OF NFA REGISTRATION RULE 215
Dear Ms. Webb:
Pursuant to Section 17(j) of the Commodity Exchange Act, as amended, National Futures Association ("NFA") hereby submits to the Commodity Futures Trading Commission ("Commission" or "CFTC") a proposed amendment to NFA Registration Rule 203(a) and the adoption of NFA Registration Rule 215. The proposals contained herein were approved by NFAs Board of Directors on November 21, 1996. NFA respectfully requests Commission review and approval of the proposals.
Proposed Amendment to NFA Registration Rule 203(a) and Adoption of NFA Registration Rule 215 (additions are underscored):
RULE 203. REGISTRATION FEES.
(12) Late Ethics Training Fee. A sponsor shall a pay fee of $500 for each AP that it sponsors who has not timely complied with the ethics training requirements in accordance with CFTC Regulation 3.34. Sole proprietor FCMs, IBs, CPOs, CTAs and LTMs who have not timely complied with the ethics training requirements in accordance with CFTC Regulation 3.34 shall pay a fee of $500.
RULE 215. SUSPENSION OF REGISTRATION FOR NONCOMPLIANCE WITH ETHICS TRAINING REQUIREMENTS.
NFA may give written notice to any AP and any sole proprietor FCM, IB, CPO, CTA and LTM who has not timely complied with the ethics training requirements in accordance with CFTC Regulation 3.34 that their registration shall be suspended effective ten days after the date of the notice. The suspension shall remain in effect until NFA receives from a listed ethics training provider satisfactory evidence of compliance with the ethics training requirements.
As the Commission is aware, CFTC ethics training requirements mandate that individuals registered as of April 1993 must have completed an ethics training program by April 1996 and must attend refresher courses every three years. New registrants must complete their ethics training within six months of becoming registered and must also attend courses every three years thereafter.
The Commission recently wrote to NFA and requested that NFA consider adopting rules that would provide a financial disincentive for non-compliance with the CFTC's ethics training requirements. The Commission specifically suggested that NFA look at NFA's rule imposing $100 fees for late Form 8-Ts as a model and include suspensions for repeated non-compliance. In considering this matter, NFA determined that charging firms a $500 late fee for each of its overdue APs would be an appropriate and more effective disincentive for non-compliance with the CFTC's ethics training requirements. In addition to the late fee, NFA determined to amend its rules to provide for the automatic suspension of APs who continue to be ethics training "scofflaws."
NFA realizes that there can be delays in the reporting of attendance data by ethics training providers to NFA, and NFA wants to apply its rules in a way which minimizes the likelihood that any such delay could impact a Member firm or AP unfairly. NFA intends to notify each Member at least once a year of that Member's APs who are currently overdue for ethics training. NFA staff would inform the Member that if those APs do not complete their ethics training within 30 days, the firm will be subject to a $500 late fee for each overdue AP and the AP will be subject to summary suspension. NFA would not, however, immediately invoice the firm or suspend the APs after the 30 days had run. Rather, an additional 30 days would be provided to allow for the receipt of reporting information from providers. At the end of that 30 days the firm would be invoiced for $500 for every AP still showing as overdue. In addition, each of the overdue APs would be given notice at that time that their registrations will be suspended in 10 days and that the suspension will remain in effect until the AP demonstrates that he is in compliance with the ethics training requirements. NFA feels that this approach provides ample but not excessive time for individual registrants and their sponsors to comply with the rules and also provides NFA and the sponsor with enough time to investigate and resolve any disputed facts regarding any AP's ethics training status.
NFA respectfully requests that the Commission review and approve the proposals contained in this submission and requests that they be declared effective upon Commission approval.
Daniel J. Roth
cc: Chairman Brooksley Born
* On January 30, 1997 the CFTC approved the proposed new Interpretive Notice, new rule and rule amendments described above. See Notice to Members I-97-03.