Disciplinary Information FAQs
If the matter disclosed is a disqualification from registration under either Section 8a(2) or 8a(3) of the Commodity Exchange Act, the application will probably be reviewed by an internal NFA committee. The committee will review the circumstances of each disqualification independently and decide whether to approve the registration or recommend that a proceeding be initiated to deny the registration.
In a criminal case, adjudication is the determination by the court that the defendant is guilty or not guilty.
The matter should be reported as a felony or misdemeanor based upon the potential sentence. If the matter could result in a sentence of imprisonment for more than one year, it would be equivalent to a felony and should be disclosed under Form 7-R or Form 8-R, Question A, Disciplinary Information-Criminal Disclosures.
If the matter could result in a sentence of imprisonment for any period of at least six days but not more than one year, it would be equivalent to a misdemeanor. For example, if the maximum sentence is imprisonment for thirty days, the offense would be a misdemeanor. Specified misdemeanor charges to which the applicant pleaded guilty or of which the applicant was found guilty or convicted, should be disclosed under Form 7-R or Form 8-R, Question B, Disciplinary Information-Criminal Disclosures.
If felony charges are pending against you, you must answer yes to Question C, Disciplinary Information-Criminal Disclosures.
If charges to any of the specified misdemeanors are pending against you, you must answer yes to Question C, Disciplinary Information-Criminal Disclosures.
If you pleaded not guilty and were found not guilty or were not convicted, you do not need to answer yes to any question. However, if you pleaded guilty to or nolo contendere ("no contest") to, or were found guilty of a felony, you must answer yes to Question A, Disciplinary Information-Criminal Disclosures, even if it did not result in a conviction. If you pleaded guilty or were found guilty of a specified misdemeanor, you must answer yes to Question B, Disciplinary Information-Criminal Disclosures, even if it did not result in a conviction. If you pleaded no contest to a misdemeanor, however, you do not have to disclose it if you were not convicted or found guilty.
If the felony charge was reduced to a misdemeanor described in Question B, Disciplinary Information-Criminal Disclosures and you pleaded guilty or were found guilty or convicted, you are required to answer yes to that question.
Income tax offenses are treated like all other criminal matters. If you pleaded guilty or no contest to, were found guilty of or were convicted of a felony income tax offense, you must answer yes to Question A, Disciplinary Information-Criminal Disclosures. If you pleaded guilty to, were found guilty or convicted of a misdemeanor income tax offense described in Question B, Disciplinary Information-Criminal Disclosures, you must answer yes to that question. If felony or any of the specified misdemeanor income tax charges are pending against you, you must answer yes to Question C, Disciplinary Information-Criminal Disclosures.
Matters that are the subject of a general court martial are considered felonies and matters that are the subject of a special court martial are considered misdemeanors. Otherwise, the same rules apply.
Gambling offenses are treated like all other criminal matters. If you pleaded guilty or no contest to, were found guilty of or were convicted of a felony gambling offense, you must answer yes to Question A, Disciplinary Information-Criminal Disclosures. If you pleaded guilty to, were found guilty or convicted of a misdemeanor gambling offense, you are required to answer yes to Question B, Disciplinary Information-Criminal Disclosures. If felony or misdemeanor gambling charges are pending against you, you must answer yes to Question C, Disciplinary Information-Criminal Disclosures.
No. The Commodity Futures Trading Commission requires that all criminal matters involving felonies and specified misdemeanors to which you have pleaded guilty or nolo contendere (no contest) or been convicted or found guilty, must be disclosed, regardless of whether they have been expunged; set aside or sealed; there was a conditional discharge or post-conviction dismissal; a state certificate of relief from disabilities was issued; or a pardon was granted. However, if you entered a nolo contendere plea to a misdemeanor, you do not have to disclose it if you were not convicted or found guilty.
Yes, unless you then pleaded not guilty and were found not guilty after a trial.
It is best to request the entire file from the court and submit all the documents to NFA. NFA will probably request additional documents from you if your documents do not reflect all of the following information:
- The complaint
- Your entry of a plea or plea agreement, or judgement/conviction
- The sentence
- Proof that you completely satisfied your sentence
- The final outcome of the court's action
You should always submit a notarized statement to NFA that describes, in your words, the circumstances surrounding the arrest.
The court where the case was handled can provide copies of the court documents or conduct a court records search.
A Matter Page is a page within the Form 7-R in which a firm provides details of event(s) being reported within the Disciplinary Information questions. If a Disciplinary Information question is answered "Yes" on the Form 7-R, a Matter Page must be completed and submitted as part of the application for each matter that caused the "Yes" answer. For example, if a firm has been convicted of a felony in two separate cases and answers "Yes" to the Disciplinary Information questions about criminal felony convictions, a separate Matter Page for each of the cases must be completed and submitted.
Yes. Only Question J, Disciplinary Information-Financial Disclosures on the Form 8-R is limited to activity in the futures industry. Please review NFA's policy on failure to disclose by reading these Notices to Members: Failure to Disclose Material Information on Registration Applications and Late Disclosure Filing Fee.
Failure to disclose disciplinary matters will result in a $1,000 fee and could be deemed an additional disqualification from registration. It is in your best interest to disclose all applicable matters. Please review NFA's policy on failure to disclose by reading these Notices to Members: Failure to Disclose Material Information on Registration Applications and Late Disclosure Filing Fee.
In addition, the failure to answer yes when a yes answer is required or not completing a Matter Page for each matter will result in a $1,000 fee and could result in the firm's or individual's registration being denied or revoked.
In addition, the firm's principal's failure to answer yes when a yes answer is required or not completing a Matter Page for each matter will result in a $1,000 fee and could also result in the firm's registration being denied or revoked.
It is not necessary that the applicant or registrant intentionally fails to disclose the information to be disqualified from registration under the Commodity Exchange Act. Practically speaking, a firm, or individual who knows about the information that is required to be disclosed but fails to disclose that information has willfully failed to disclose material information, absent credible evidence that shows otherwise.
NFA reviews each failure to disclose and evaluates the explanation provided for the non-disclosure to determine whether the circumstances surrounding the non-disclosure were truly willful and not simply negligent or careless. However, if the facts and circumstances evidence that the non-disclosure was truly willful and not simply negligent or careless, the non-disclosure would constitute a basis for an adverse registration action.
Criminal matters resulting in dismissal after completion of probation
Many states have a procedure to handle certain criminal offenses that do not ultimately result in a conviction. These are commonly known as "diversion programs." Often, the offender pleads guilty and the judge "withholds adjudication," which means the judge does not find the offender guilty. Instead, the offender is sentenced to supervision, probation or something similar. If the offender satisfactorily completes the supervision or probation, the guilty plea is vacated and the case is dismissed. Often, the judge, the prosecutor or the offender's lawyer tells the offender that the criminal case doesn't need to be disclosed in any kind of application. Sometimes, the case is ordered to be expunged from all official records.
However, the CFTC still requires a yes answer to the Criminal Information questions even if:
- the matter has been expunged or the records sealed;
- there was no adjudication or finding of guilt;
- the guilty plea was vacated or set aside;
- the matter was dismissed upon completion of the diversion program;
- the judge, prosecutor or defense lawyer said that disclosure is not required; or
- another regulatory body or self-regulatory authority doesn't require disclosure.
Regulatory matters reported to another regulatory or self-regulatory authority
Regulatory matters, particularly in the securities industry, are often reported to the FINRA Web CRD database by either an employer, the agency that took the action or the person subject to the action.
The regulatory action must still be disclosed by answering yes to the pertinent regulatory Disciplinary Information question and a Matter Page completed. The fact that the matter was disclosed to the FINRA Web CRD will not be considered evidence that the failure to disclose was not willful.
The individual told the firm about a disclosable matter, but the matter is not disclosed on the Form 8-R.
All firms must electronically file Form 8-Rs on behalf of their principals and other individuals requiring registration. Generally, someone at the firm completes the Form 8-R, including answering the Disciplinary Information questions, based on the information that the individual provides to the firm. Sometimes, the firm does not answer the Disciplinary Information questions correctly, answering no, when the answer should be yes or not completing a Matter Page for each matter.
Each individual must electronically review the Form 8-R after the firm files it and electronically verify that the information contained in the Form 8-R is accurate and complete. If the individual verifies the information without thoroughly reviewing it or relies on the firm to have accurately completed the Form 8-R, the CFTC considers the failure to include the disclosable matter as willful. An individual should never electronically verify that an application containing incorrect information is accurate. The individual should let the firm know about the inaccuracy and verify the application's accuracy only after the firm corrects the information.
The individual's registration or license was subject to special conditions
Some regulatory bodies, including various states, and self-regulatory authorities allow individuals to act in a registered licensed capacity but only if they and/or their employer comply with certain conditions. Commonly these include special supervisory or reporting requirements or restrictions on the type of activities the individual can engage in or the type of customers the individuals may do business with.
These special conditions or restrictions must be disclosed in response to the Form 8-R regulatory Disciplinary Information questions even if the conditions or restrictions are no longer in place. If they are in place, they must also be disclosed. Additionally, conditions or restrictions that are included in an agreement with the regulatory or self-regulatory body (these types of agreements are generally not reported to the FINRA Web CRD) rather than an order issued by the regulatory or self-regulatory body must also be disclosed.
To avoid being disqualified from registration, it is critical to carefully read the instructions and the questions on the application. A question that is answered incorrectly because it was misunderstood or misread can result in severe consequences, including denial or revocation of registration.
If you have any concerns regarding whether a matter must be disclosed, rely only on advice from NFA.
If any information provided by the firm or individual on the application changes or a matter that requires disclosure on the application occurs after the application is filed or registration is granted, the new information must be promptly disclosed to NFA. All individuals should advise the firm of the new information, and the firm must file the update on their behalf.
The failure to promptly update information will result in a $1,000 fee and can also result in the registration being denied or revoked.
Refer to Important Information Regarding Failure to Disclose Disciplinary Information on a Registration Application for more information.
Occasionally we will find out about matters that were not reported on Form 7-R or Form 8-R, and we may need information from you to see if they should have been disclosed. For example, we may require you to provide documentation indicating that no criminal charges were filed after an arrest, in which case a letter from the applicable district attorney or arresting agency or documents from a court search may be sufficient. If we cannot determine from the FBI rap sheet whether a matter was a misdemeanor or a felony, we may require you to provide documentation to make that determination. If you were charged but found "not guilty" after a trial, we may require evidence of that, too.
No. Only findings made by a domestic or foreign governmental body (other than the CFTC) require disclosure under Form 7-R / 8-R Regulatory Disclosure Question E. However, sanctions imposed by an SRO (other than NFA or a domestic futures exchange) or domestic or foreign governmental body (other than the CFTC) may require disclosure under Form 7-R / 8-R Regulatory Disclosure Question G. NFA's Registration Investigations staff is available at (312) 781-1410 or (800) 621-3570 if you've read the Disciplinary Information-Regulatory Disclosure questions and you are not sure whether a regulatory action requires disclosure.
For the definition of SRO and investment-related statutes visit the Instructions and Definitions section of the Form 8-R.
Failure to pay a futures-related arbitration award requires disclosure under Form 8-R, Disciplinary Information — Financial Disclosures, Question J. If any component of the unpaid award involves a CFTC-regulated product, it requires disclosure regardless of where the case was heard. Otherwise, pending, adjudicated, settled or dismissed arbitration matters do not need to be disclosed.
Unpaid reparations awards require disclosure under Form 8-R, Disciplinary Information-Financial Disclosures, Question J. Otherwise, pending, adjudicated, settled or dismissed reparations matters do not need to be disclosed.
Disclosure of a bankruptcy matter is required only if the bankruptcy trustee filed an adversary action against you. For those cases, you should provide NFA with a copy of the initial complaint and the final disposition of each matter.
For a definition of adversary action visit the Instructions and Definitions section of the Form 8-R.