Notices to Members
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January 13, 2022
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)
Forex Dealer Members (FDM)
Introducing Brokers (IB)
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.
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.
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. NFA 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. With respect to trading activity, firms should monitor to ensure any transfers or trades are not made to customers' detriment.
Third-Party Service Providers: Members that outsource regulatory functions must adopt and implement a written supervisory framework over outsourced functions to mitigate outsourcing-related risks pursuant to Interpretive Notice 9079. Firms must maintain records demonstrating that they have addressed the items outlined in the Interpretive Notice and are following their procedures.
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.
Notifications (FCMs only): Under certain circumstances, an FCM must transmit a notice filing (PDF) to NFA via WinJammerTM. For example, an FCM must notify its DSRO within 24 hours if it becomes the subject of a formal investigation by the SEC, a securities SRO or a futures SRO. An FCM must provide its DSRO a copy of any examination report issued to the FCM by the SEC or a securities SRO. An FCM must also provide notice of any correspondence received from the SEC or a securities SRO that raises issues with the adequacy of its capital position, liquidity to meet its obligations or ability to operate its business or internal controls.
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.Risk Management Programs (FCMs only): CFTC Regulation 1.11 requires FCMs that holds customer funds to establish, maintain and enforce a system of risk management policies and procedures designed to monitor and manage the risks associated with the FCM's activities. Firms must provide its senior management and its governing body with a quarterly Risk Exposure Report (RER), as well as interim RERs at any time the FCM detects a material change in the FCM's risk exposure. FCMs must file a copy of the quarterly RER and any interim RERs within five business days of providing the report to its senior management.
Ongoing Updates
On an ongoing basis, each NFA Member must update its Annual Questionnaire in the event of a material change to its operations. For example, if a Member begins soliciting for virtual currency or micro contract products or begins doing business, the Member must immediately update its Annual Questionnaire. Keeping the Annual Questionnaire up-to-date ensures firms receive all applicable notices relating to their reporting requirements in a timely manner and ensures that BASIC displays accurate information about firms' business activities when applicable.
Recent Amendments and Reminders
The following links contain Notices to Members regarding reminders and recent amendments to NFA Rules and Interpretive Notices.
Contact NFA
If you need assistance with any NFA requirements, please contact NFA's Information Center (312-781-1410 or 800-621-3570 or information@nfa.futures.org).
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.