Enhanced Supervisory Requirements
NFA Compliance Rules 2-9 and 2-36(e) place a continuing responsibility on every Member to diligently supervise all aspects of their futures activities, including the sales practices of their employees and agents.
NFA Members that employ associated persons (AP) and principals who have worked at firms that have been formally sanctioned or barred for using misleading or deceptive sales practices or promotional material may be required to adopt enhanced supervisory requirements (ESR) to prevent sales practice abuse. Firms whose principals were previously principals of firms subject to ESR may also be required to adopt ESR.
NFA Interpretive Notice: Enhanced Supervisory Requirements specifies the criteria that obligate a Member to adopt these requirements. Firms that qualify for NFA's enhanced supervisory requirements may also petition for a waiver from those requirements.
Those Member firms meeting the criteria for enhanced supervisory requirements and who have not received a waiver must, among other things:
- Maintain enhanced capital requirements;
- Make complete audio recordings of all telephone conversations that occur between their APs and both existing and potential customers;
- Maintain electronic communications that occur between their APs and both existing and potential customers;
- Have procedures in place to monitor AP telephone recordings and electronic communications on an ongoing basis; and
- File all promotional materials with NFA at least 10 days prior to its first use.