Enhanced Supervisory Requirements FAQs
The requirements are imposed on Members that meet specific criteria based on the disciplinary history of their APs and principals or on their commission levels. Section III of Interpretive Notice 9021 describes these criteria.
A Disciplined Firm is one that has been sanctioned by NFA or the CFTC during the last five years or permanently barred by NFA or the CFTC based on a formal charge of sales practice or promotional material violations or a firm that has been ever been sanctioned for sales practices involving the offer, purchase or sale of security futures products.
Not for that reason alone. However, the firm may be subject to the enhanced supervisory requirements for other reasons, such as the background of its APs or the commissions it charges.
If you are a Member, you can check the Disciplined Firm List in ORS. If you are an Associate, you can check the firm's disciplinary history in BASIC. The firm will come off the Disciplined Firm list five years after the penalty date listed in BASIC unless the firm was permanently barred, was sanctioned for sales practices involving security futures, or has a more recent sanction for sales practice and promotional material violations that is less than five years old.
Yes. The broker's Status History screen in ORS indicates if a current or former AP has been employed by a Disciplined Firm.
The Firm Profile menu on the firm's ORS Status page includes a link to a screen called, Disciplined Employee Summary, which contains this information.
Yes. Under the Interpretive Notice to Compliance Rule 2-9: Enhanced Supervisory Requirements, the APs of an FCM's GIBs will be treated as APs of the FCM for determining whether the FCM meets the criteria to adopt the enhanced supervisory requirements. The sole exception to this rule would occur if the GIB were added to the five-year disciplined firms list after the effective date of its guarantee agreement with the FCM. In that case, the APs of the GIB would not be counted toward the FCMs total number of APs with at least one disciplined firm in their background as long as they have not been registered at any other firms on NFA's disciplined firms list.
Note that if an FCM enters into a guarantee agreement with an IB that has been charged in an NFA or CFTC enforcement action alleging sales practice or promotional material violations and the charges have not been resolved, the APs of the GIB would count toward the FCMs total number of APs with at least one disciplined firm in their background if the GIB is subsequently added to the five-year disciplined firm's list.
Once a firm meets the enhanced supervisory criteria, it must adopt the requirements unless it files a petition for a waiver with the Telemarketing Procedures Waiver Committee and the Committee grants your firm's waiver request. In addition, changing the firm's personnel composition after it meets the criteria won't affect your firm's qualification status, so you cannot avoid it by terminating an employee who was included in the count of APs or principals who were previously employed by a Disciplined Firm.
Firms may ask for a partial or full waiver from complying with the enhanced supervisory requirements by filing a petition with the three-person Telemarketing Procedures Waiver Committee within 30 days after NFA notifies the firm that it is required to adopt the requirements. If your firm fails to file a timely waiver request, then it may not ask for a full or partial waiver again until at least two years have passed since the firm adopted the enhanced procedures. Similarly, if the Waiver Committee denies your waiver request, your firm may not ask for a waiver again until at least two years have passed since your firm adopted the required enhanced procedures.
See the non-exclusive list in Section IV of Interpretive Notice 9021.
Probably, although there are limited exemptions for individuals who worked at a Disciplined Firm a long time ago or for a short period of time. See Section A-4 of Interpretive Notice at 9021 for a complete description of the exemptions.
Yes. See Interpretive Notice 9021 for the specific capital requirements that apply. Affected Members can ask the Telemarketing Procedures Waiver Committee for a waiver from complying with the increased capital requirement.
Yes. CPOs and CTAs must meet the requirements imposed by Interpretive Notice 9021 unless the CPO or CTA asks for, and receives, a waiver from complying with the enhanced capital requirement.
If a firm meets the criteria, it must file all promotional material, as defined in NFA Compliance Rule 2-29(i), with NFA at least 10 days before using the material for the first time. This requirement also applies to all existing promotional material the firm is using at the time the enhanced supervisory requirements become effective. In addition, if your firm is an FCM that guarantees IBs, this requirement also applies to the promotional material used by your firm's guaranteed IBs.