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March 26, 2013
FCM responsibilities for the review and approval of their Guaranteed Introducing Brokers' communications with the public
Recently, NFA has experienced a sharp increase in the number of promotional material submissions to NFA's Pre-review Program by Guaranteed Introducing Brokers ("GIBs") that have not first submitted the material to their Guarantor FCM for review and approval. In some cases, the Guarantor FCM has specifically directed its GIB to forward the material to NFA prior to its own review. In other cases, the GIB has submitted the material to NFA without the Guarantor FCM's knowledge. Since Guarantor FCMs are required to supervise the activities of their GIBs, including approving all GIB promotional material, the Guarantor FCM should review this material before the material is sent to NFA's Pre-Review Program. The purpose of this notice is to remind Member FCMs of their supervisory responsibilities with respect to GIB promotional material and communications with the public.
NFA Compliance Rule 2-9 and the related Interpretive Notice entitled Supervision of Branch Office and Guaranteed Introducing Brokers outlines an FCM's supervisory responsibilities with respect the activities of its GIBs. Specifically, the Interpretive Notice requires that NFA Members adopt written procedures regarding the use of promotional material and communications with the public. These procedures require that a Guarantor FCM review and approve all GIB promotional material prior to use. Therefore, in order to ensure that the Guarantor is adequately supervising its GIB's use of promotional material, all promotional material should be reviewed and approved by the Guarantor FCM prior to submitting the material to NFA. In order to demonstrate adherence with Compliance Rule 2-9, all promotional material submissions by GIBs to NFA must be accompanied by an attestation by the appropriate supervisory personnel at the Guarantor FCM that the material has been reviewed and approved in accordance with the requirements of NFA Compliance Rule 2-29.
NFA's Pre-review Program is available to all Members. This program is free of charge and offers Members the ability to submit promotional material to NFA prior to its use and receive timely feedback on whether the promotional material is compliant with NFA Rules. NFA staff will typically perform their review within 14 days of receipt of the submission. The focus of the review consists of identifying obvious deficiencies that could result in a violation of NFA Compliance Rule 2-29. The review does not focus on verifying the accuracy of every statement or numerical claim made in the promotional material as this responsibility remains with the Member. Furthermore, a Member's submission of promotional material under the Pre-review Program does not provide a "safe harbor" to the Member if misstatements or omissions of material facts are discovered subsequently.
If you have any questions regarding this notice, please contact:
David Croom, Manager, Compliance at (312) 781-1452 or firstname.lastname@example.org
Michael Mason, Manager, Compliance at (312) 781-1447 or email@example.com