Skip Navigation LinksHome > NFA Manual / Rules > NFA Rule

NFA Manual / Rules

Welcome to the online version of NFA's rulebook, the NFA Manual. We update this version on an ongoing basis. If you want to check out what changes have most recently been made to the NFA Manual, go to Recent Manual Updates.

Registration Rules



RULE 504. PROCEDURES GOVERNING APPLICANTS AND REGISTRANTS DISQUALIFIED FROM REGISTRATION UNDER SECTION 8a(2), 8a(3) OR 8a(4) OF THE ACT.
[Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; December 10, 1993; August 1, 1994; July 1, 2001; April 2, 2004; December 15, 2004; March 6, 2009; and November 7, 2010.]

(a) Notice of Intent. On the basis of information which NFA has obtained, the President of NFA may at any time serve a Notice of Intent upon any person registered or applying for registration in any capacity, stating that:

    (1) NFA alleges and is prepared to prove that the applicant or registrant is subject to one or more of the statutory disqualifications set forth in Section 8a(2), 8a(3) or 8a(4) of the Act;

    (2) the allegations set forth in the Notice of Intent, if true, constitute a basis upon which registration can be denied, conditioned, suspended or revoked (if the Notice of Intent proposes conditioning registration, the Notice shall specify the proposed conditions );

    (3) the applicant or registrant is entitled to have the Membership Committee or a designated Subcommittee considers written evidence of the type set forth in paragraph (f) of this Rule. The Notice of Intent shall inform the applicant or registrant of the procedures which will be followed if no written submission is made in accordance with this Rule; and

    (4) if an applicant for registration has been granted a temporary license, such temporary license shall terminate five days after service on the applicant of the Notice of Intent.

(b) Written Response to the Notice of Intent.

    (1) In response to a Notice of Intent alleging a disqualification from registration set forth in Section 8a(2), 8a(3) or 8a(4) of the Act, the applicant or registrant may submit a written response challenging the accuracy of the allegations establishing the statutory disqualification, including evidence as to:

      (A) the applicant's or registrant's identity;

      (B) the existence of a clerical error in any record documenting the statutory disqualification;

      (C) the nature or date of the statutory disqualification;

      (D) the post-conviction modification of any record of conviction; or

      (E) the favorable disposition of any appeal.

    (2) The applicant or registrant shall state the nature of each challenge in the response and submit an affidavit to support facts material to each challenge. In the response, the applicant or registrant also shall state whether he intends to show that, notwithstanding the accuracy of the allegations set forth in the Notice of Intent, his registration would pose no substantial risk to the public.

    (3) Time for Filing of Response. A written response to the Notice of Intent must be served upon NFA's Legal Docketing Department within 20 days of the date of the service of the Notice of Intent upon the applicant or registrant. All applicants and registrants must include the disqualification fee required by Rule 203(a)(11) with their response.

    (4) Default of Applicant or Registrant to Notice of Intent. If the applicant or registrant fails to file a timely written response to the Notice of Intent, the applicant or registrant shall be deemed to have waived his right to submit such written response, and the facts stated in the Notice of Intent shall be deemed to be true for the purpose of finding that the applicant or registrant is disqualified from registration under Section 8a(2), 8a(3) or 8a(4) of the Act. The Membership Committee or a designated Subcommittee shall thereafter, after a finding that service was properly effected in accordance with Rule 502, enter a Final Order denying, conditioning, suspending or revoking the registration. Such finding shall be based upon the evidence of the statutory disqualification and the Notice of Intent with proof of service. In order to prevent injustice and on such conditions as may be appropriate, the Membership Committee or a designated Subcommittee may set aside a default order. Any motion to set aside a default shall be made within a reasonable time, shall state the reasons for the failure to file and shall specify the nature of the proposed defense.

(c) Reply to Response of a Registrant Subject to an 8a(2) Disqualification. If a registrant who is alleged to be subject to an 8a(2) disqualification submits a written response, challenging the accuracy of the allegations establishing the statutory disqualification, the Vice President of Registration and Membership may submit a written reply to the Membership Committee or a designated Subcommittee and serve such reply upon the registrant within 10 days of the date of such written response. The reply shall include evidence establishing the existence of the statutory disqualification.

(d) Interim Order. After the receipt of a registrant's written response to the Notice of Intent and any reply thereto from the Vice President of Registration and Membership, the Membership Committee or a designated Subcommittee shall determine whether the registrant is disqualified from registration under Section 8a(2) of the Act.

    (1) If the Membership Committee or a designated Subcommittee determines that the registrant is disqualified under Section 8a(2) of the Act, the Membership Committee or a designated Subcommittee, within 30 days after receipt of the registrant's written response, if any, and any reply thereto, shall issue an interim order suspending the registration of the registrant. The interim order shall inform the registrant that the registration of the registrant shall be suspended, effective five days after the interim order is served upon the registrant, and such suspension shall remain in effect until a Final Order has been issued. In no event shall the registrant be suspended for a period to exceed six months.

    (2) If the Membership Committee or a designated Subcommittee determines that the registrant is not disqualified from registration under Section 8a(2) of the Act, the Membership Committee or a designated Subcommittee shall, within 30 days after receipt of the registrant's written response and any reply thereto, either issue a Withdrawal of Notice of Intent or, if the Membership Committee or a designated Subcommittee determines that the disqualification constitutes a Section 8a(3) disqualification, it may grant the Vice President leave to file an Amended Notice of Intent within thirty days. In either event, the Membership Committee or a designated Subcommittee shall make a finding that the registrant is not disqualified under Section 8a(2) of the Act.

    (3) If the Membership Committee or a designated Subcommittee determines that there is not enough evidence in the written record to decide whether the registrant should be disqualified from registration under Section 8a(2) of the Act, the Membership Committee or a designated Subcommittee may, within 30 days after receipt of the registrant's written response and any reply thereto, either decline to make a finding or issue an order for an oral hearing. The Membership Committee or a designated Subcommittee shall rely upon any evidence produced at an oral hearing and any written submissions to make the determination required in paragraphs (d)(1) or (d)(2) of this Rule.

(e) Oral Hearing. Within 30 days of the date the applicant or registrant files its response to the Notice of Intent, NFA shall notify the applicant or registrant of the time and place of a hearing. At such hearing, the parties shall be limited in their case-in-chief to presentation of witnesses and documents listed in their submissions as described in (f) and (g) below, except for good cause shown.

(f) Respondent's Witnesses and Evidence. If, in response to the Notice of Intent, the applicant or registrant states that he intends to make the showing referred to in paragraph (b)(2) of this Rule, he shall, at least 30 days before the date of the hearing, file with NFA's Legal Docketing Department a statement of the applicant or registrant or his attorney identifying and summarizing the testimony of each witness whom the applicant or registrant intends to have testify in support of facts material to his showing. Such submission also must include copies of all documents which the applicant or registrant intends to introduce to support facts material to his showing. In making a showing pursuant to paragraph (b)(2) of this Rule, the applicant or registrant may present:

    (1) mitigating evidence relating to the facts and circumstances surrounding the disqualifying conduct;

    (2) evidence of rehabilitation since the disqualifying conduct; and

    (3) evidence that the applicant's or registrant's registration would be subject to supervisory controls, including proposed conditions likely to detect future wrongdoing by the applicant or registrant and protect the public from any harm arising from such future wrongdoing.

(g) NFA's Witnesses and Evidence. At least 15 days before the date of the hearing the Vice President of Registration and Membership shall serve, on the applicant or registrant a description of the factual issues raised in the applicant's or registrant's response and further submission, if any, that NFA regards as material and disputed. Such reply also shall include the identity and a summary of the expected testimony of each witness whom NFA intends to have testify at its case-in-chief and copies of all documents which NFA intends to introduce at such hearing.

(h) Termination. In the event that an applicant or registrant's pending or current registration is terminated after the issuance of a Notice of Intent but prior to the effective date of a Final Order, the Membership Committee or a designated Subcommittee may issue a Withdrawal of Notice of Intent indicating that because the applicant or registrant is no longer registered or pending registration, further proceedings are not warranted.

 
NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the futures markets.