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February 08, 2021
Educational resources, common deficiencies and other important regulatory information for FCM, FDM and IB Members
NFA is committed to providing its Members with the resources they need to meet their regulatory obligations as efficiently as possible. This Notice covers educational resources, common deficiencies and links to Notices to Members regarding recent amendments to NFA Rules and Interpretive Notices.
Members Section of NFA's Website
From the Members section of NFA's website, Members can access information detailing their regulatory obligations including the following:
Futures Commission Merchants (FCM)
Visit NFA's COVID-19 page for guidance, current relief and updates related to the ongoing pandemic.
Virtual Member Education
NFA will hold a virtual Member regulatory workshop in spring 2021. The workshop agenda will cover examinations and recent rulemaking initiatives, among other topics. More information will be distributed shortly.
Regulatory Obligations Related to Common Deficiencies
The following section describes a number of regulatory obligations related to common deficiencies noted during NFA examinations of Member FCMs for which NFA is the DSRO, FDMs and IBs.
Supervision: Pursuant to NFA Compliance Rules 2-9, and 2-36, FCM, FDM and IB Members are required to diligently supervise their employees and agents in the conduct of their commodity interest activities. While some relief has been granted with regards to recordkeeping requirements, NFA still expects firms to ensure that they have written supervisory policies and procedures to address the manner, frequency and results of monitoring written and oral communications. Such supervision includes, when required1, maintaining a record of all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading and prices that lead to the execution of a transaction in a commodity interest and related cash or forward transaction, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device or other digital or electronic media.
Self-Examination Questionnaire: NFA Members must annually review their operations using NFA's Self-Examination Questionnaire. This questionnaire is designed to aid Members in recognizing potential problem areas and to alert them to procedures that need to be revised or strengthened.
Cybersecurity: FCM, FDM and IB Members must adopt a written information systems security program (ISSP) pursuant to Interpretive Notice 9070 to address the risk of unauthorized access to or attack of their information technology systems and to respond appropriately should unauthorized attacks occur. Members are also required to notify NFA of certain cybersecurity incidents related to their commodity interest activities via NFA's Cyber Notice Filing System. One common deficiency in this area is failure to provide cybersecurity training to employees upon hiring and annually thereafter.
Members that fail to establish and implement an ISSP may be subject to disciplinary action.
Anti-Money Laundering: FCM and IB Members must ensure that their anti-money laundering programs include procedures for conducting ongoing customer due diligence and verifying beneficial owners for legal entity customers as outlined in Interpretive Notice 9045. Common deficiencies in this area include:
- For firms that rely on other financial institutions to identify and verify beneficial owners for legal entity customers, failure to establish or update existing contracts to incorporate the requirements that will be performed by the other financial institution;
- Failure to provide annual training to applicable employees; and
- Failure to conduct an annual independent review of the firm's AML program.
Public Disclosures (FCMs only): Under CFTC Regulation 1.55, FCMs must provide disclosures on certain material business operations to customers prior to opening an account and must make those disclosures available to the general public. Firms must update this disclosure information, including any changes to the principals of the firm, as changes to firm operations arise.
Recent Amendments and Reminders
The following links contain Notices to Members regarding reminders and recent amendments to NFA Rules and Interpretive Notices.
I-20-26: Effective date for NFA rule amendments related to NFA's penalties and other disciplinary procedures
I-20-25: Amendments to NFA Interpretive Notice 9045—Compliance Rule 2-9: FCM and IB Anti-Money Laundering Program now effective
I-20-21: Increase in Fraudulent Phishing Emails Warrants Member Vigilance
If you need assistance with any NFA requirements, please contact NFA's Information Center (312-781-1410 or 800-621-3570 or email@example.com).
1 An IB that has generated over the preceding three years more than $5 million in aggregate gross revenues from its activities as an IB is required to maintain certain oral and written communications.