Search NFA Rulebook


Articles of Incorporation


ARTICLE I: NAME

The name of the Corporation shall be National Futures Association (hereinafter "NFA").


ARTICLE II: LOCATION

NFA's principal office shall be in Chicago, Illinois. NFA shall maintain a regional office in New York, New York and at such other locations as the Board of Directors (hereinafter "Board") may designate.


ARTICLE III: PURPOSES

[Effective dates of amendments: April 14, 1983; January 1, 1990; April 23, 2001; April 1, 2013; and October 8, 2015.]

Section 1: Fundamental Purposes.

Subject to the limitations in Section 2 of this Article, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by

    (i) undertaking the regulation of persons that are members of NFA (hereinafter "Members") as set forth in this Article;

    (ii) relieving the Commission from the substantial burden of direct regulation in such matters; and

    (iii) providing such regulatory services to such markets as the Board may from time to time approve. Actions of NFA to effectuate these purposes may include:

    (a) Public Interest.

    The adoption, administration and enforcement as to the following persons of requirements regarding fair practice and designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and, in general, to protect the public interest

      (i) Members that are registered with the Commission as Futures Commission Merchants, Commodity Pool Operators, Commodity Trading Advisors, Introducing Brokers, Leverage Transaction Merchants, Retail Foreign Exchange Dealers, Swap Dealers or Major Swap Participants; and

      (ii) Associates (See Article XVIII).

    (b) Financial Standards.

    Notwithstanding the provisions of Section 2(a) of this Article, the adoption with respect to its Members that are Futures Commission Merchants, Introducing Brokers, Leverage Transaction Merchants, Retail Foreign Exchange Dealers, Swap Dealers or Major Swap Participants of financial and related requirements designed to protect against insolvency, bankruptcy, or unsafe or unsound financial condition of such Members; the conduct, directly or through agents, of audits and reviews of the financial condition and related matters of such Members; and the adjudication and enforcement of compliance with NFA's financial and related requirements for all such Members, except as may otherwise be provided under Commission Regulations: Provided, however, it is expressly understood that Contract Markets and Clearing Organizations shall have the right to adopt, administer and enforce financial and related requirements governing the eligibility of Members for membership privileges on such Contract Markets or Clearing Organizations.

    (c) Arbitration.

    The adoption and administration of a fair and equitable procedure through arbitration or otherwise for the voluntary settlement of customers' claims or grievances against Members described in paragraph (a) above, their employees, and Associates, in accordance with Section 17(b)(10) of the Act, or claims or grievances of such Members or Associates against customers, or claims or grievances between or among such Members or Associates: Provided, however, no such procedure shall apply to the settlement of a claim or grievance where the parties, by valid and binding agreement, have committed themselves to the resolution of such claim or grievance in a forum other than NFA, or where parties having claims or grievances between or among themselves are required by Contract Market rules to submit the controversy to the settlement procedures of such Contract Market.

    (d) Qualifications Standards.

    The adoption of appropriate standards with respect to such training, experience and other qualification requirements as NFA deems necessary and appropriate to insure the fitness of Members and Associates; the development and administration of written proficiency examinations of Members and Associates; and, with the approval of the Commission, the administration of the registration of Members, Associates and any other persons required to be registered with the Commission. Such requirements, examinations and registrations adopted by NFA with respect to Associates shall, with the consent of each Contract Market Member conducting comparable activities, replace and supplant the requirements, examinations and related activities theretofore conducted with respect to Associates by the Contract Market Member.

    (e) Protection of Customers.

    Notwithstanding the provisions of Section 2(a) of this Article, the adoption, administration and enforcement of uniform, industry-wide requirements regarding the dealings and relations between and among Members described in paragraph (a) above, Associates and the customers of such Members and Associates, including, without limitation, requirements governing the manner, method, and place of soliciting business, including the content of such solicitations and the form and manner of handling, recording, and accounting for customers' orders, transactions, and accounts.

    (f) Doing Business With Non-Members.

    The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with the Commission as a Futures Commission Merchant, Commodity Pool Operator, Commodity Trading Advisor, Introducing Broker or Leverage Transaction Merchant and that is acting in respect to the account, order, or transaction for a customer, a commodity pool or participant therein, a client of a commodity trading advisor, or any other person, unless

      (i) such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board or

      (ii) such suspended Member is exempted from this prohibition by the Board or a committee thereof.

    The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless

      (i) such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board or

      (ii) such suspended Member is exempted from this prohibition by the Board or a committee thereof.

    (g) Corporate Powers.

    The purchase or other acquisition, and the holding, owning, maintaining, working, developing, selling, leasing, exchanging, hiring, conveying, mortgaging or otherwise disposing of and dealing in, lands and leaseholds, and any interest, estate and rights in personal property, and any personal or mixed property, and any franchises, rights, licenses or privileges necessary, convenient or appropriate for any of the purposes herein expressed; the borrowing of funds for NFA's purposes and the pledging of real, personal or mixed property in connection therewith; the institution and defense of suits in NFA's name, and the settlement or compromising of any claim or controversy by or against it; and, subject to the delineation of purposes recited herein and the limitations set forth in Section 2 of this Article, the carrying out of all and everything necessary, suitable or proper for the accomplishment of any of the purposes, or the attainment of any of the objects, or the furtherance of any of the powers hereinabove set forth, and the performance of every other act or acts incident or appurtenant to, or growing out of, or connected with the aforesaid business or powers, or any part or parts thereof, and the exercise of all or any of its corporate powers or rights in the State of Delaware and in the various other states, territories, and dependencies of the United States, in the District of Columbia and in all or any foreign countries.

Section 2: Contract Market

    (a) Non-applicability of NFA Rules.

    No NFA requirement shall purport to govern or otherwise regulate the specific conduct of a Member or Associate if such conduct is governed or regulated by the requirements of a Contract Market and such Member or Associate is subject to the Contract Market's disciplinary jurisdiction for such conduct.

    (b) Prohibition Upon Adoption of Certain Rules.

    NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate any of the following:

      (i) The minimum level of margin required for any futures or swaps contract or type of futures or swaps transaction, the method for calculation thereof, or compliance therewith, unless such rule, standard, requirement or procedure conforms and is not inconsistent with applicable Contract Market requirements.

      (ii) Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.

      (iii) The rights, privileges, duties or responsibilities of membership in any Contract Market or Clearing Organization.

      (iv) The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.

      (v) The conduct of business or other activities on the trading floor of a Contract Market.

      (vi) The terms or conditions of any futures contract.

      (vii) The terms or conditions of any swaps contract; provided that such terms or conditions conform to and are not inconsistent with applicable Contract Market requirements.

Section 3: Communications With Legislative Bodies.

NFA shall not communicate any statement as its official position, view or opinion to a legislative body on any matter pending or contemplated to be pending before such body, except with the prior approval of the Board.


ARTICLE IV: FORM OF ORGANIZATION

[Effective dates of amendments: October 15, 2001.]

NFA shall be a membership corporation and shall have no capital stock and shall have no authority to issue any stock. NFA is not organized and shall not be conducted for profit, and no part of its net revenues or earnings shall inure to the benefit of any Member except for the repayment of bona fide loans or other credit extended by a Member to NFA.


ARTICLE V: [RESERVED]


ARTICLE VI: MEMBERS

[Effective dates of amendments: February 10, 1983; April 14, 1983; February 7, 1986; January 1, 1990; August 16, 1993; and April 1, 2013.]

Section 1: Membership Eligibility.

Persons eligible to become NFA Members shall include:

    (a) any person registered or provisionally registered with the Commission;
    (b) any Contract Market; and
    (c) any person designated by Commission Rule as eligible for NFA membership.

Section 2: Membership Category.

Each Member which qualifies for membership status in one or more of the following categories

(a) FCMs;
(b) CPOs;
(c) CTAs;
(d) IBs;
(e) LTMs;
(f) RFEDs;
(g) SDs; or
(h) MSPs

shall be deemed to be a Member for the purposes of Articles VII, VIII and X only in that single category to which its business activities primarily relate. Each Member shall have one vote on all matters on which the Member's category is entitled to vote.


ARTICLE VII: BOARD OF DIRECTORS

[Effective dates of amendments: February 10, 1983; November 27, 1984; February 7, 1986; January 22, 1988; July 19, 1988; January 1, 1990; August 2, 1990; September 8, 1992; October 16, 1992; August 16, 1993; January 21, 1994; October 24, 1994; July 23, 1996; May 1, 1998; January 22, 2001; October 15, 2001; October 9, 2007; May 18, 2009; November 16, 2009; April 1, 2013; May 19, 2014; November 20, 2014 and October 8, 2015.]

Section 1: General.

The duties of the Board of Directors shall include the management of NFA's business, the adoption of NFA's Bylaws, and the fulfillment of NFA's fundamental purposes.

Section 2: Composition of the Board until the Annual Meeting of the Board of Directors Held in February 2016.

Until the regular annual meeting of the Board of Directors as set forth in Bylaw 506 (hereinafter "regular annual meeting of the Board" or "Board's regular annual meeting") held in February 2016, the Board of Directors shall be comprised as follows:

    (a) Contract Market Representatives.

      (i) In the event that there are four (4) or less Contract Market Members having annual transaction volume during the prior calendar year of more than 1,000,000, then one representative of each such Contract Market Member.

      (ii) In the event that there are more than four (4) Contract Market Members with annual transaction volume during the prior calendar year of more than 1,000,000:

        (a) One representative of each Contract Market Member ranked in the top three (3) Contract Market Members based on annual transaction volume during the prior calendar year.

        (b) One (1) elected representative of Contract Market Members with annual transaction volume during the prior calendar year of more than 1,000,000 that are not included in Section 2(a)(ii)(a) above. Only Contract Market Members not represented in accordance with Section 2(a)(ii)(a) shall be eligible to vote for the representatives elected in accordance with this Section 2(a)(ii)(b).

      (iii) A specific Contract Market's annual transaction volume shall be the number of commodity futures contracts and swaps contracts entered into on the Contract Market during the calendar year. The number of contracts entered into on a Contract Market shall be adjusted where necessary because of differences in sizes of contracts (e.g., one 5,000 oz. contract for a particular commodity would equal five 1,000 oz. contracts for that commodity for purposes of the computation).

      (iv) A Contract Market Member and all Contract Market Members with which it is affiliated shall have no more than one representative on the Board at any one time. For the purposes of this limitation, a Contract Market Member shall be deemed to be affiliated with another Contract Market Member if it directly or indirectly owns 100 percent of or is owned 100 percent by or has 100 percent ownership in common with such other Contract Market Member.

    (b) Futures Commission Merchant, Leverage Transaction Merchant and Introducing Broker Representatives.

      Nine (9) elected representatives of registered Futures Commission Merchant Members, registered Leverage Transaction Merchant Members and registered Introducing Broker Members, divided as follows:

        (i) Seven (7) representatives of FCMs, including (A) at least three (3) representatives of FCMs ranked in the top ten FCMs and (B) at least three (3) representatives of FCMs and LTMs not ranked in the top ten FCMs based on the total of futures customer segregated funds and foreign futures or foreign options secured amounts, as those terms are defined in the applicable Commission regulations, held as of June 30 of the prior calendar year.

        (ii) One representative of IBs required to maintain minimum adjusted net capital.

        (iii) One representative of IBs not required to maintain minimum adjusted net capital.

    (c) Commodity Pool Operator and Commodity Trading Advisor Representatives

      Five (5) elected representatives of registered Commodity Pool Operators and registered Commodity Trading Advisors that are NFA Members, including at least three (3) representatives of CPOs or CTAs that rank within the top 20 percent, one (1) of which must rank within the top 5 percent of CPOs or CTAs reporting any funds under management allocated to futures and swaps (as defined in Article XVIII) on NFA Form PQR and NFA Form PR as of June 30 of the prior calendar year.

    (d) Swap Dealer and Major Swap Participant Representatives and Retail Foreign Exchange Dealer Members.

      Seven (7) elected representatives of registered or provisionally registered Swap Dealers, registered or provisionally registered Major Swap Participants and registered Retail Foreign Exchange Dealers, divided as follows:

        (i) At least three (3) representatives of SDs that are Large Financial Institutions, as of June 30 of the prior calendar year.

        (ii) At least three (3) representatives of SDs or RFEDs that are not included in paragraph (d)(i) above, as of June 30 of the prior calendar year.

        (iii) One representative of MSPs: Provided, however, that if there are no persons willing and eligible to be a representative of MSPs, then one (1) representative of SDs and RFEDs.

    (e) Public Representatives.

      (a) Effective as of the 2013 annual meeting of the Board, eleven (11) individuals who are Public Representatives (see Article XVIII); and

      (b) Effective as of the 2016 annual meeting of the Board, individuals who are Public Representatives (see Article XVIII) shall constitute thirty-five percent (35%) of the Board's voting representatives.

    (f) An FCM, LTM, RFED, IB, CTA, CPO, SD or MSP Member and all of its Affiliates (See Article XVIII(b)) shall have no more than one representative on the Board at any one time.

Section 2A: Composition of Board from and after the Annual Meeting of the Board of Directors Held in February 2016.

Notwithstanding anything to the contrary contained herein, the terms of office of all Directors in office shall expire at the regular annual meeting of the Board held in February 2016. From and after the regular annual meeting of the Board held in February 2016, the Board of Directors shall be comprised as follows:

    (a) Contract Market Representatives.

      (i) In the event that there are three (3) or less Contract Market Members having annual transaction volume during the prior calendar year of more than 1,000,000, then one (1) representative of each such Contract Market Member.

      (ii) In the event that there are more than three (3) Contract Market Members with annual transaction volume during the prior calendar year of more than 1,000,000:

        (a) One (1) representative of each Contract Market Member ranked in the top two (2) Contract Market Members based on annual transaction volume during the prior calendar year; and

        (b) One (1) elected representative of Contract Market Members with annual transaction volume during the prior calendar year of more than 1,000,000 that are not included in Section 2A(a)(ii)(a) above. Only Contract Market Members not represented in accordance with Section 2A(a)(ii)(a) shall be eligible to vote for the representatives elected in accordance with this Section 2A(a)(ii)(b).

      (iii) A specific Contract Market's annual transaction volume shall be the number of commodity futures contracts and swaps contracts entered into on the Contract Market during the calendar year. The number of contracts entered into on a Contract Market shall be adjusted where necessary because of differences in sizes of contracts (e.g., one 5,000 oz. contract for a particular commodity would equal five 1,000 oz. contracts for that commodity for purposes of the computation).

      (iv) A Contract Market Member and all Contract Market Members with which it is affiliated shall have no more than one (1) representative on the Board at any one time. For the purposes of this limitation, a Contract Market Member shall be deemed to be affiliated with another Contract Market Member if it directly or indirectly owns 100 percent of or is owned 100 percent by or has 100 percent ownership in common with such other Contract Market Member.

    (b) Futures Commission Merchant, Leverage Transaction Merchant and Introducing Broker Representatives.

      Seven (7) elected representatives of registered Futures Commission Merchant Members, registered Leverage Transaction Merchant Members and registered Introducing Broker Members, divided as follows:

        (i) Five (5) representatives of FCMs, including (A) at least two (2) representatives of FCMs ranked in the top ten FCMs and (B) at least two (2) representatives of FCMs and LTMs not ranked in the top ten FCMs based on the total of futures customer segregated funds and foreign futures or foreign options secured amounts, as those terms are defined in the applicable Commission regulations, held as of June 30 of the prior calendar year.

        (ii) One (1) representative of IBs required to maintain minimum adjusted net capital.

        (iii) One (1) representative of IBs not required to maintain minimum adjusted net capital.

    (c) Commodity Pool Operator and Commodity Trading Advisor Representatives

      Four (4) elected representatives of registered Commodity Pool Operators and registered Commodity Trading Advisors that are NFA Members, including (i) at least one (1) representative of CPOs or CTAs ranked within the top five (5) percent and (ii) at least one (1) representative of CPOs or CTAs ranked within the top ten (10) percent of CPOs or CTAs reporting any funds under management allocated to futures and swaps (as defined in Article XVIII) on NFA Form PQR and NFA Form PR as of June 30 of the prior calendar year.

    (d) Swap Dealer and Major Swap Participant Representatives and Retail Foreign Exchange Dealer Members.

      Five (5) elected representatives of registered or provisionally registered Swap Dealers, registered or provisionally registered Major Swap Participants and registered Retail Foreign Exchange Dealers, divided as follows:

        (i) At least two (2) representatives of SDs that are Large Financial Institutions, as of June 30 of the prior calendar year; and

        (ii) At least two (2) representatives of SDs, MSPs or RFEDs that are not included in paragraph (d)(i) above, as of June 30 of the prior calendar year.

    (e) Public Representatives.

      Ten (10) individuals who are Public Representatives (see Article XVIII).

    (f) An FCM, LTM, RFED, IB, CTA, CPO, SD or MSP Member and all of its Affiliates (See Article XVIII) shall have no more than one (1) representative on the Board at any one time.

Section 3: Nominations; Election.

The elected Directors shall be chosen as follows:

    (a) Nominating Committee.

    The Nominating Committee (see Article X) shall nominate at least one candidate for each elected FCM and LTM; IB; CPO and CTA; and SD, MSP and RFED Director position to be filled. These nominations shall be made in accordance with the eligibility requirements contained in this Article. The Nominating Committee shall nominate candidates whose election shall result in diverse segments of each category being represented on the Board based upon the size of the Member, the type of business conducted by the Member and the type of customer serviced by the Member.

    (b) Petition Procedure.

    Nominations may be made for elected FCM and LTM; IB; CPO and CTA; and SD, MSP and RFED Director positions by:

      (i) Petition signed by 50 or more NFA Members in the category for which the nomination is made (i.e., FCM and LTM; SD, MSP and RFED; IB; and CPO and CTA); or

      (ii) Petition submitted by any organization or association recognized by NFA as fairly representing the category (See (b)(i) above) for which the nomination is made.

    Petitions shall be submitted in the manner specified in the Bylaws. No petition may nominate more than one candidate for the same position.

    (c) Election.

    If there is a contested election in any category (See (b)(i) above) of NFA Members, the Members in that category shall thereafter elect by plurality vote from such nominees the Directors that are to represent that category. The election shall be conducted in the manner provided in the Bylaws, which shall provide for an Annual Election. If there is not a contested election in any category of NFA Members, the Directors that are to represent that category shall be elected to the Board by the members of the Executive Committee, other than the members who are Public Representatives (and solely for such purposes shall be deemed the sole voting members under the General Corporation Law of the State of Delaware).

    (d) Public Representatives.

    The Public Representatives shall be chosen as follows: Before the Annual Election, the Board shall solicit the nomination of individuals to serve on the Board in the Public Representative category. At the Board's regular annual meeting, the Board shall, by majority vote, elect the Public Representatives to serve on the Board.

    (e) Contract Markets

    At the Annual Election held in 2016 and at all Annual Elections held thereafter, in the event of an election as described in Article VII, Section 2A(a)(ii)(b), the Contract Market representatives shall be elected as follows: Before the Annual Election, the Board shall solicit from Contract Market Members eligible to have representatives pursuant to Article VII, Section 2A(a)(ii)(b) the nomination of individuals to serve on the Board as representatives of such Contract Market Members. If there is a contested election of such Contract Market Members, the Contract Market Members eligible to vote pursuant to Article VII, Section 2A(a)(ii)(b) shall thereafter elect by plurality vote from such nominees the Directors that will represent them. The election shall be conducted in the manner provided in the Bylaws, which shall provide for an Annual Election. If there is not a contested election of such Contract Market Members, the Directors that are to represent that category shall be elected to the Board by the members of the Executive Committee, other than the members who are Public Representatives (and solely for such purposes shall be deemed the sole voting members under the General Corporation Law of the State of Delaware).

Section 4: Terms of Directors.

    (a) Contract Market Directors.

    Notwithstanding anything to the contrary contained herein, the terms of office of all Directors in office shall expire at the regular annual meeting of the Board held in February 2016. From and after the regular annual meeting of the Board held in February 2016, Directors representing Contract Market Members shall serve for one-year terms, from the date of the Board’s regular annual meeting until the date of the Board’s regular annual meeting one year hence.

    (b) Other Directors.

    Notwithstanding anything to the contrary contained herein, the terms of office of all Directors in office shall expire at the regular annual meeting of the Board held in February 2016. The Nominating Committee shall determine which Directors, other than Contract Market Directors and Public Representatives, whose terms begin on the date of the regular annual meeting of the Board held in February 2016 shall serve two-year terms as follows: three (3) representatives of FCMs and LTMs, at least one (1) of which is described in Section 2A(b)(i)(A) and at least one (1) of which is described in Section 2A(b)(i)(B); one (1) representative of IBs; two (2) representatives of CPOs or CTAs, at least one (1) of which is described in Sections 2A(c)(i) and 2A(c)(ii); and three (3) representatives of SDs, MSPs and RFEDs, at least one (1) of which is described in Section 2A(d)(i) and at least one (1) of which is described in Section 2A(d)(ii). The remainder of such Directors shall serve one-year terms. The Board shall determine which five (5) of the Public Representatives whose terms begin on the date of the regular annual meeting of the Board held in February 2016 shall serve two-year terms. The remainder of the Public Representatives shall serve-one-year terms. Except as provided above, Directors other than Contract Market Member Directors shall serve for two-year terms, from the date of the Board's regular annual meeting following the Annual Election at which they are elected until the date of the Board's regular annual meeting two years hence.

Section 5: Voting; Quorum.

Each Director shall have one vote upon any matter coming before the Board for official action, and, except as otherwise provided in these Articles or NFA's Bylaws, the affirmative vote of a majority of the Directors present and voting at a meeting of the Board shall be NFA's official act if a quorum is present. A quorum of the Board shall consist of one-half of the Directors, except where NFA Bylaws specify a lesser number in emergency situations.

Section 6: Establishment of Major Plans and Priorities.

The Board shall establish for observance by the Executive Committee (See Article VIII) and NFA staff major plans and priorities, including those regarding the commitment and expenditure of NFA funds.

Section 7: Chairman and Vice Chairman.

There shall be a Chairman and Vice Chairman of the Board. They shall serve for one-year terms and shall be elected by the Board at its regular annual meeting, by majority vote. The Chairman shall be elected from among the Directors in office and the Vice Chairman shall be elected from among Directors elected to serve on the Executive Committee.

Section 8: Vacancies.

A vacancy that occurs on the Board before the expiration of a Director's term or because additional Directors in existing or new Member categories are required shall be filled (for the unexpired term) by an eligible individual elected by majority vote of the remaining Directors who represent the category of Members in which the vacancy occurred, except that if the vacancy involves a representative of a Contract Market Member, that Contract Market Member shall designate the successor. In the event there are no Directors remaining who represent the category of Members in which the vacancy occurred, the vacancy shall be filled by an eligible individual elected by the Board.

      Section 9: Removal.

      In accordance with Section 141(j) of the General Corporation Law of the State of Delaware, notwithstanding anything to the contrary set forth in the other provisions of the General Corporation Law of the State of Delaware, including the other provisions of Section 141, Directors may be removed from office as follows:

        (a) Any Director representing a Contract Market Member described in Article VII and any FCM and LTM; SD and MSP; IB; or CPO and CTA Director may be removed by a majority of the Members eligible to elect the Director whenever, in their judgment, the best interests of NFA will be served thereby; or

        (b) Upon recommendation of the Executive Committee, any Director may be removed by two-thirds of the Directors present and voting at a duly convened meeting of the Board whenever, in their judgment, the best interests of NFA will be served thereby.

      Section 10: Director Qualifications.

      In addition to any other Director qualification set forth herein or in the Bylaws or any other policy of the Board or NFA, no Director who has been removed from office in accordance with Section 9 of Article VII hereof shall be qualified to be a Director at any time following such removal.


      ARTICLE VIII: EXECUTIVE COMMITTEE

      [Effective dates of amendments: November 27, 1984; February 7, 1986; January 22, 1988; January 1, 1990; August 16, 1993; May 1, 1998; January 22, 2001; October 15, 2001; May 18, 2009; November 16, 2009; April 1, 2013; May 19, 2014; and October 8, 2015.]

      Section 1: General.

      There shall be an Executive Committee of the Board, which may exercise all powers of the Board except as set forth in Section 2 below. The authorized actions of the Executive Committee shall be deemed actions of the Board.

      Section 2: Board Powers Not Exercisable By Executive Committee.

        (a) General Prohibitions.

        The Executive Committee shall not exercise any power of the Board when the Board is in session, and the Executive Committee shall at no time take any action with respect to any matter that is the subject of a notice of a pending Board meeting without the concurrence of the Board.

        (b) Specific Prohibitions.

        The Executive Committee shall at no time exercise any of the following powers of the Board:

          (i) The adoption, amendment or repeal of any Bylaw unless such power has been delegated by the Board in accordance with Article XI, Section 1; or the ratification of any proposal to adopt, amend or repeal these Articles.

          (ii) The establishment of major plans and priorities, including those regarding the commitment and expenditure of NFA funds, except that the Board may authorize the Executive Committee to make expenditures within specific monetary limits prescribed in the Bylaws or Board Resolutions.

          (iii) Except as provided in Article VII, Section 3(c) and Section 3(e), the election, appointment or removal of any NFA Director, officer or committee member.

          (iv) The adoption of a plan of merger or consolidation with another entity.

          (v) The sale, lease, exchange or mortgage of all or substantially all of NFA property or assets.

          (vi) The voluntary dissolution of NFA or the revocation of proceedings therefor.

          (vii) The adoption of a plan for the distribution of NFA assets.

          (viii) The amendment or repeal of any Board Resolution that, by its terms, provides that it shall not be amended or repealed by the Executive Committee.

      Section 3: Composition.

      The Executive Committee shall comprise the following:

        (a) NFA's President, who shall be an ex officio, non-voting member; and

        (b) The Chairman of the Board, who shall be a non-voting member except in the case of tie votes; and

        (c) Thirteen (13) Directors, as follows:

          (i) Two (2) Directors representing Contract Markets:

            (A) One (1) representative of a Contract Market that had transaction volume of more than 20 percent of aggregate contract market transaction volume during the prior calendar year. A specific Contract Market's transaction volume shall be the number of commodity futures contracts and swaps contracts entered into on the Contract Market. The aggregate contract market transaction volume shall be the number of such contracts entered into on all U.S. contract markets. The number of contracts entered into on a Contract Market shall be adjusted where necessary because of differences in sizes of contracts (e.g., one 5,000 oz. contract for a particular commodity would equal five 1,000 oz. contracts for that commodity for purposes of the computation); and

            (B) One (1) representative of a Contract Market other than a Contract Market described in clause (A) above: Provided, however, if no Contract Market described in clause (A) above is represented on the Board, there shall be two Directors on the Committee from Contract Markets represented on the Board;

          (ii) Two (2) Directors representing FCMs, LTMs or IBs;

          (iii) Two (2) Directors representing CPOs and CTAs;

          (iv) Two (2) Directors representing SDs, MSPs or RFEDs; and

          (v) Five (5) Directors who are Public Representatives (see Article XVIII(s)).

      Section 4: Election of Members; Vacancies.

      The elected members of the Executive Committee shall be chosen by the Board at the regular annual meeting as follows: The Directors representing Contract Markets that had transaction volume of more than 20 percent of aggregate Contract Market transaction volume during the prior calendar year shall elect the Committee member in category (c)(i)(A) above; the Directors representing all other Contract Markets shall elect the Committee member in category (c)(i)(B) above; the Directors representing FCMs, LTMs and IBs shall elect the Committee members in category (c)(ii) above; the Directors representing CPOs and CTAs shall elect the Committee members in category (c)(iii) above; the Directors representing SDs, MSPs and RFEDs shall elect the Committee members in category (c)(iv) above; and the Public Representative Directors shall elect the Committee members in category (c)(v) above. A vacancy that occurs on the Executive Committee before the expiration of a Committee Member's term or because additional Committee Members in existing or new Member categories are required shall be filled in like manner. Tie votes may be resolved by the Board by random draw.

      Section 5: Voting; Quorum.

      Each member of the Executive Committee shall have one vote on Executive Committee matters. A majority of the Executive Committee members shall constitute a quorum.


      ARTICLE IX: PRESIDENT AND SUBORDINATE OFFICERS

      There shall be a President, a Secretary, and a Treasurer, and such other subordinate officers as the Board deems appropriate. The foregoing officers shall be appointed, and may be removed, by the Board, as prescribed in the Bylaws. The President shall be the Chief Executive Officer of NFA and shall have the duties prescribed in these Articles, the Bylaws and Board Resolutions.


      ARTICLE X: NOMINATING COMMITTEE

      [Effective dates of amendments: April 14, 1983; February 7, 1986; July 19, 1988; January 1, 1990; August 2, 1990; February 10, 2000; January 22, 2001; October 15, 2001; April 1, 2013; May 19, 2014; and October 8, 2015.]

      Section 1: General.

      There shall be a Nominating Committee, composed of four Subcommittees, one for each of the following categories of Members: (i) FCMs and LTMs, (ii) IBs, (iii) CPOs and CTAs and (iv) SDs, MSPs and RFEDs. Each Subcommittee shall nominate at least one candidate for each position to be filled on the Board in the Subcommittee's category, in accordance with the eligibility requirements of Article VII.

      Section 2: Composition; Term of Members.

        (a) Each Subcommittee of the Nominating Committee shall be composed of three representatives of the Subcommittee's category, except that:

          (i) The FCM and LTM Subcommittee shall be composed of three representatives, including (A) until the regular annual meeting of the Board held in February 2016, at least one representative of FCMs described in Article VII, Section 2(b)(i)(A) and at least one representative of FCMs or LTMs described in Article VII, Section 2(b)(i)(B) and (B) from and after the regular annual meeting of the Board held in February 2016, at least one representative of FCMs described in Article VII, Section 2A(b)(i)(A) and at least one representative of FCMs or LTMs described in Article VII, Section 2A(b)(i)(B);

          (ii) The IB Subcommittee shall be composed of three representatives, including at least one representative of IBs required to maintain minimum adjusted net capital and at least one representative of IBs not required to maintain minimum adjusted net capital;

          (iii) The CPO and CTA Subcommittee shall include at least one representative that primarily acts as a CPO and at least one representative that primarily acts as a CTA; and

          (iv) The SD, MSP and RFED Subcommittee shall be composed of three representatives, including (A) until the regular annual meeting of the Board held in February 2016, at least one representative of SDs described in Article VII, Section 2(d)(i) and at least one representative of SDs or RFEDs described in Article VII, Section 2(d)(ii) and (B) from and after the regular annual meeting of the Board held in February 2016, at least one representative of SDs described in Article VII, Section 2A(d)(i) and at least one representative of SDs, MSPs, or RFEDs described in Article VII, Section 2A(d)(ii).

        (b) Members of the Nominating Committee shall serve staggered terms of three years from the date of the Board's regular annual meeting following the Annual Election at which they are elected until the date of the Board's regular annual meeting three years hence.

      Section 3: Selection of Committee Members.

      Each Subcommittee of the Nominating Committee shall nominate, for each position to be filled on the Nominating Committee, one eligible individual for election by the Members to that Subcommittee for the following term. Additional nominations may be made for each such position by petition in the manner set forth in Article VII, Section 3. The procedures for such election shall be the same as those prescribed in Article VII, Section 3. No person shall be nominated or elected to the Nominating Committee who has served on the Nominating Committee during the preceding term, and no person shall be nominated or elected to the Nominating Committee who, at the time of such nomination or election, is a Director. Any vacancy that occurs on the Nominating Committee shall be filled by the Board from among persons eligible under this Article to serve thereon.


      ARTICLE XI: BYLAWS

      [Effective dates of amendments: February 7, 1986; January 1, 1990; August 16, 1993; October 15, 2001; April 1, 2013; May 19, 2014; and October 8, 2015.]

      Section 1: Adoption, Amendment and Repeal.

      Bylaws of NFA may be adopted, amended or repealed in accordance with Article VII, Section 5, except that the Board shall not take the following actions unless a two-thirds majority of the Directors present and voting approves:

        (i) Delegating or otherwise granting authority to any NFA Committee, officer, employee or agent, or any other person, to adopt, amend or repeal any Bylaw;

        (ii) Adopting, amending or repealing any Bylaw regarding dues or assessments; and

        (iii) Adopting, amending or repealing any Bylaw regarding dues, assessments or similar charges imposed on Contract Market Members.

      Section 2: Content of Bylaws.

      Except insofar as such matters are expressly contained in these Articles, the following shall be as provided from time to time in NFA's Bylaws: The conditions of, method of admission to, and qualifications for membership and Associate registration; the limitations, rights, powers and duties of Members and Associates; dues and assessments; the method of expulsion from and the termination of membership and Associate registration; the procedures for the settlement of claims and grievances; and all other matters pertaining to membership in, registration with, and the conduct, management and control of the business, property and affairs of NFA.


      ARTICLE XII: EFFECTIVE DATE OF REQUIREMENTS

      The NFA Board may establish such effective date for any of its requirements as it deems appropriate in light of NFA resources and the prudent initiation of particular NFA operations and programs.


      ARTICLE XIII: DURATION

      NFA shall have perpetual existence.


      ARTICLE XIV: MEMBERS' LIABILITY

      The private property of the Members shall not be subject to the payment of NFA's debts or liabilities to any extent whatsoever.


      ARTICLE XV: FINANCING

      [Effective date of amendments: April 1, 2013.]

      Section 1: Costs.

      The initial costs of organization of NFA shall be borne by the Organizers, except that the Board in its discretion may reimburse the Organizers for all or any part of such verified organizational expenses.

      Section 2: Initial Working Capital.

      The initial working capital of NFA shall consist of borrowings from Contract Markets or other sources, to be evidenced by loan agreements, promissory notes or other evidences of indebtedness, which shall be repaid as promptly as practicable from dues, assessments or other revenue received by NFA.

      Section 3: Revenue.

      The operating income of NFA shall consist of dues, assessments, fees and other charges upon Members and others as prescribed from time to time in NFA's Bylaws, subject to Section 1 of Article XI. NFA schedules of such charges may prescribe different rates or amounts for different categories of Members, or sub-categories therein, endeavoring to reflect differences in the financial burden borne or expected to be borne by NFA in carrying out its duties and programs for each such category or sub-category.

      Section 4: Loans and Other Receipts.

      Nothing herein shall prohibit or inhibit the Board, in its discretion, from securing loans, accepting gifts, grants or contributions, or otherwise obtaining financing to meet NFA's initial or on-going needs in lieu of or in addition to the other methods of financing recited in this Article.


      ARTICLE XVI: MISCELLANEOUS

      [Effective dates of amendments: April 14, 1983; July 1, 1987; April 1, 2013; and October 8, 2015.]

      Section 1: Registered Office.

      The registered office of NFA in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware, 19801. The name of its registered agent is the Corporation Trust Company.

      Section 2: Indemnification.

      NFA shall provide in its Bylaws for indemnification of its past and present directors, officers, committee members, employees and agents, and any person who is serving or has served at NFA's request as a director, officer, committee member, employee or agent of another organization, to the full extent permitted by law

      Section 3: Dissolution.

      Upon dissolution, the net assets of NFA, after payment of liabilities, shall be distributed to the then Members in proportion to the dues and assessments previously paid.

      Section 4: Directors' Liability.

      To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its members for monetary damages for breach of fiduciary duty as a director.


      ARTICLE XVII: ADOPTION, AMENDMENT AND REPEAL OF ARTICLES

      [Effective dates of amendments: April 14, 1983; February 7, 1986; September 8, 1987; January 1, 1990; October 16, 1992; October 15, 2001; April 1, 2013; May 19, 2014; and October 8, 2015.]

      No provision of these Articles may be adopted, amended or repealed except in the manner prescribed in this Article. Each such proposed change to the Articles shall be reviewed by the Board, and shall be submitted to the Members of NFA only upon approval of the proposal by the Board by two-thirds of the Directors present and voting. If any such proposed change relates to Article III, Section 2, such proposed change shall not be considered by the Board for approval unless at least 60 days written notice of the proposed change has been given to each Contract Market Member. Upon such approval, the proposal shall be submitted to a vote of the Members and shall be adopted upon the affirmative vote of a majority of those Members that cast a vote in each of the categories set forth in Sections 2A(a)-2A(d) of Article VII.


      ARTICLE XVIII: DEFINITIONS.

      [Effective dates of amendments: April 14, 1983; February 7, 1986; January 1, 1990; May 1, 1998; January 22, 2001; October 15, 2001; November 16, 2009; April 1, 2013; May 19, 2014; and October 8, 2015.]

      As used in this Certificate of Incorporation-

        (a) "Act"-means the Commodity Exchange Act, as amended from time to time.

        (b) "Affiliate"-means, unless otherwise provided, any person that directly or indirectly owns more than 50% of or is owned more than 50% by or has more than 50% ownership in common with another person.

        (c) "Associate"-means a person who is associated with a Member within the meaning of the term “associated person” as used in the Act or Commission Rules and who is required to be registered as an “associated person” with the Commission; and any other person designated by the Board to be an Associate.

        (d) "Board" or "Board of Directors"-means the Board of Directors of NFA.

        (e) "Clearing Organization"-means an entity (whether a unit or division of the Contract Market, or a separate organization) that clears commodity futures transactions or swaps transactions executed on a Contract Market.

        (f) "Commission"-means the Commodity Futures Trading Commission.

        (g) "Commodity Pool Operator" or "CPO"-means a commodity pool operator as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules, except any CPO that the Board has designated to be an Associate.

        (h) "Commodity Trading Advisor" or "CTA"-means a commodity trading advisor as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules, except any CTA that the Board has designated to be an Associate.

        (i) "Contract Market"-means an exchange registered by the Commission as a designated contract market.

        (j) "Fees"-means charges for processing applications, administering qualifications examinations, conducting arbitrations, and other clerical and administrative fees. The term “Fees” does not include dues, assessments or similar charges.

        (k) "Futures"-includes options contracts traded on a Contract Market, and such other commodity-related instruments as the Board may from time to time declare by Bylaw to be properly a subject of NFA regulation and oversight.

        (l) "Futures Commission Merchant" or "FCM"-means a futures commission merchant as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules.

        (m) "Introducing Broker" or "IB"-means an introducing broker as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules.

        (n) "Large Financial Institution"-means a Swap Dealer included in a well defined, publicly available and independent list of financial institutions that the Board of Directors identifies by resolution from time to time.

        (o) "Leverage Transaction Merchant" or "LTM"-means a major swap participant as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules.

        (p) "Major Swap Participant" or "MSP"-means a major swap participant as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules.

        (q) "Member"-means a member of NFA.

        (r) "Person"-includes individuals, corporations, partnerships, trusts, associations and other entities.

        (s) "Public Representative"-refers to those members of the Board of Directors who are public directors as that term is defined in Section (b)(2) of Core Principle 16 in Appendix B to Part 38 of the Commission's Rules and is read in the context as applied to NFA.

        (t) "Requirements"-includes any duty, restriction, procedure, or standard imposed by a charter, bylaw, rule, regulation, resolution or similar provision.

        (u) "Retail Foreign Exchange Dealer" or "RFED"-means a retail foreign exchange dealer as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules.

        (v) "Swap Dealer" or "SD"-means a swap dealer as that term is used in the Act, and that is required to be registered as such under the Act and Commission Rules.

        (w) "Swaps"-means swaps as used and defined in the Act and in the Commission Rules, and such other swap-related agreement, contract or transaction as the Board may from time to time declare by Bylaw to be properly a subject of NFA regulation and oversight.


      Bylaws


      Chapter 1. Offices

      BYLAW 101. REGISTERED OFFICE.

      The registered office of National Futures Association (hereinafter "NFA") shall be in the City of Wilmington, County of New Castle, State of Delaware.


      BYLAW 102. OTHER OFFICES.

      NFA's principal office shall be in Chicago, Illinois. NFA shall maintain a regional office in New York, New York, and offices at such other locations as NFA's Board of Directors (hereinafter "Board of Directors" or "Board") designates.


      Chapter 2. Purposes

      BYLAW 201. PURPOSES.

      [Effective date of amendments: August 1, 2016.]

      NFA's purposes are as stated in Article III of NFA's Certificate of Incorporation (as it may be amended from time to time, the "Articles").


      Chapter 3. Membership and Association with a Member

      BYLAW 301. REQUIREMENTS AND RESTRICTIONS.

      [Effective dates of amendments: April 11, 1983; July 28, 1983; September 16, 1983; June 4, 1985; August 1, 1985; January 28, 1986; December 30, 1986; July 29, 1988; January 1, 1990; October 29, 1991; August 16, 1993; September 21, 1993; April 1, 1997; March 10, 1998; March 18, 2003; July 21, 2003; September 15, 2003; December 15, 2004; November 18, 2009; September 30, 2010; October 1, 2011; July 18, 2012; January 1, 2013; February 20, 2014 and August 1, 2016.]

      (a) Eligibility for Membership.

        (i) No person, unless eligible for membership in the contract market category, shall be eligible to become or remain an NFA Member or associated with a Member unless such person is registered, provisionally registered, temporarily licensed or exempt from registration under the Act or the rules of the Commission.

        (ii) Except as provided in paragraph (e) below, no person shall be eligible to become or remain a Member or associated with a Member who:

          (A) Has been and is suspended or expelled from a registered futures association or contract market for violating any rule of the association or contract market that:

            (1) prohibits any act or transaction constituting conduct inconsistent with just and equitable principles of trade; or

            (2) requires any act which, if omitted, constitutes conduct inconsistent with such principles;

          (B) Has been and is barred or suspended from being associated with all members of a registered futures association or contract market for violating a rule described in paragraph (A) above;

          (C) Is subject to an order of the Commission denying, suspending or revoking the person's registration under Section 6(b) of the Act; expelling or suspending the person from membership in a registered futures association or contract market; or barring or suspending the person from being associated with an FCM;

          (D) Whether before or after becoming a Member or associated with a Member, was, by the person's conduct while associated with a Member, a cause of any suspension, expulsion or order described in paragraphs (a)(ii)(A)-(C) above that is in effect with respect to the person; or

          (E) Has associated with the person any other person who is known to, or in the exercise of reasonable care should be known to, the person to be ineligible to become or remain a Member or associated with a Member under paragraphs (a)(ii)(A)-(D) above.

        (iii) No person, unless eligible for membership in the contract market category or solely in the Swap Dealer ("SD") or Major Swap Participant ("MSP") category, shall be eligible to become or remain a Member unless at least one of its principals is registered as an "associated person" under the Act and Commission Rules.

        (iv) If any Member fails to have at least one principal that is registered as an "associated person" NFA shall deem that Member's failure to be a request to withdraw from NFA membership and shall notify that Member accordingly.

        (b) Registration of Associates.

        No person may be associated with a Member of NFA unless the person is registered with NFA as an Associate or is an NFA Member. As used in these Bylaws, the term "associated with a Member" means any person who is associated with a Member of NFA within the meaning of the term "associated person" as used in the Act or Commission Rules and who is required to be registered as such with the Commission. Registration with NFA as an Associate is not registration as an associated person under the Act.

        (c) Restrictions on Becoming or Remaining a Member or Associated with a Member.

        A person may be deemed disqualified to become or remain a Member or associated with a Member-

          (i) If a prior registration under the Act of such person in any capacity has been suspended (and the period of such suspension has not expired) or has been revoked;

          (ii) If registration of such person in any capacity has been refused within five years preceding the filing of the application for membership or at any time thereafter;

          (iii) If such person is permanently or temporarily enjoined by order, judgment or decree of any court of competent jurisdiction, including an order entered pursuant to an agreement of settlement to which the Commission or any Federal or State agency or other governmental body is a party, from:

            (A) acting as a futures commission merchant, introducing broker, floor broker, commodity trading advisor, commodity pool operator, leverage transaction merchant, associated person of any registrant under the Act, securities broker, securities dealer, municipal securities broker, municipal securities dealer, transfer agent, clearing agency, securities information processor, investment adviser, investment company or affiliated person or employee of any of the foregoing; or

            (B) engaging in or continuing any activity involving any transaction in or advice concerning contracts of sale of a commodity for future delivery, concerning matters subject to Commission regulation under Section 4c or 19 of the Act, or concerning securities;

          (iv) If such person has been convicted of any felony or if such person has been convicted within 10 years preceding the filing of the application for membership or at any time thereafter of any misdemeanor that:

            (A) involves any transactions or advice concerning any contract of sale of a commodity for future delivery, or any activity subject to Commission regulation under Section 4c or 19 of the Act, or concerning a security;

            (B) arises out of the conduct of the business of a futures commission merchant, introducing broker, floor broker, commodity trading advisor, commodity pool operator, leverage transaction merchant, associated person of any registrant under the Act, securities broker, securities dealer, municipal securities broker, municipal securities dealer, transfer agent, clearing agency, securities information processor, investment adviser, investment company, or an affiliated person or employee of any of the foregoing;

            (C) involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities of property, forgery, counterfeiting, false pretenses, bribery, or gambling; or

            (D) involves the violation of Section 152, 1341, 1342, or 1343, or Chapter 25, 47, 95, or 96 of Title 18, United States Code;

          (v) If such person has been found by any court of competent jurisdiction, by the Commission or any Federal or State agency or other governmental body, or by settlement agreement to which the Commission or any Federal or State agency or other governmental body is a party:

            (A) to have violated any provision of the Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Securities Investors Protection Act of 1970, the Foreign Corrupt Practices Act of 1977, or any similar statute of a State or foreign jurisdiction, or any rule, regulation, or order under any such statutes, or the rules of the Municipal Securities Rulemaking Board; or

            (B) to have willfully aided, abetted, counseled, commanded, induced, or procured such violation by any other person;

          (vi) If such person is subject to an outstanding order denying trading privileges on any contract market to such person, denying, suspending, expelling or revoking such person's membership in any contract market, registered futures association or any other self-regulatory organization, or barring or suspending such person from being associated with a registrant under the Act or with a member of a contract market, registered futures association or other self-regulatory association;

          (vii) If such person is a futures commission merchant or introducing broker and shall knowingly accept any order for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market from any person denied trading privileges on a contract market by order of the Commission under Section 6(b) of the Act and the period of denial specified in such order shall not have expired;

          (viii) Such person failed reasonably to supervise another person, who is subject to such person's supervision, with a view to preventing violations of the Act, or of any of the statutes set forth in paragraph (c)(v) of this Bylaw or of any of the rules, regulations, or orders thereunder, and the person subject to supervision committed such a violation: Provided, however, that no person shall be deemed to have failed reasonably to supervise another person, within the meaning of this paragraph if:

            (A) there have been established procedures, and a system for applying such procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any such violation by such other person, and

            (B) such person has reasonably discharged the duties and obligations incumbent upon that person, as supervisor, by reason of such procedures and system, without reasonable cause to believe that such procedures and system were not being complied with;

          (ix) Such person was debarred by any agency of the United States from contracting with the United States;

          (x) Such person willfully made any material false or misleading statement or willfully omitted to state any material fact in any application of such person for registration under the Act or for membership in NFA, in any report required to be filed with the Commission by the Act or the regulations thereunder, in any proceeding before the Commission, in any report required to be filed with NFA or in any proceeding before any Committee of NFA;

          (xi) Such person has pleaded nolo contendere to criminal charges of felonious conduct, or has been convicted in a State court or in a foreign court of conduct which would constitute a felony under Federal law if the offense has been committed under Federal jurisdiction;

          (xii) In the case of an applicant for membership in any capacity to which NFA's Financial Requirements apply, such person has not established that such person meets NFA's Financial Requirements;

          (xiii) Such person has been found by any court of competent jurisdiction or by any Federal or State agency or other governmental body, or by agreement of settlement to which any Federal or State agency or other governmental body is a party:

            (A) to have violated any statute or any rule, regulation, or order thereunder which involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of funds, securities or property, forgery, counterfeiting, false pretenses, bribery, or gambling; or

            (B) to have willfully aided, abetted, counseled, commanded, induced or procured such violation by any other person;

          (xiv) Such person has associated with any other person and knows, or in the exercise of reasonable care should know, of facts regarding such other person that are set forth as statutory disqualifications in Section 8a(2) of the Act, unless such person has notified the Commission or NFA, if NFA has been authorized or required to make the determination described in Section 4k(5) of the Act with respect to such other person, of such facts and the Commission or NFA, as the case may be, has determined that such other person should be registered or temporarily licensed;

          (xv) There is other good cause; or

          (xvi) Any principal has been or could be refused membership: Provided, however, that for the purposes of this Bylaw, "principal" shall mean any entity or individual defined as "principal" in NFA Registration Rule 101.

        (d) Qualification.

        Except as provided in paragraph (e) below, no person may become or remain an FCM, RFED, SD, MSP, CTA, CPO, IB or LTM Member or associated with such a Member unless qualified to do so in conformity with such standards of training and experience and proficiency testing requirements as NFA shall establish and such other qualification standards as NFA finds necessary or desirable.

        (e) Exceptions from Ineligibility, Restrictions and Qualifications.

        A person who is ineligible or disqualified to become or remain a Member or associated with a Member under paragraphs (a) or (d) above may nevertheless become or remain a Member or associated with a Member:

          (i) Subject to the provisions of Section 17(b)(3) of the Act, upon a finding by the Membership Committee (See Chapter 7) that the reason for ineligibility does not cause the person to pose a threat to Members, Associates or customers; or

          (ii) In such other situations as may be approved or directed by the Commission.

        (f) Application.

          (i) All applications to become a Member or to register as an Associate shall be filed electronically and provide such information as required by the Membership Committee. The Member or applicant for membership shall file all applications for itself and its Associates by accessing NFA's registration and membership database in the manner provided by NFA. Each Member or applicant for membership shall designate the person or persons authorized to file its application and the applications of its Associates. NFA may require any individual applying for registration as an Associate to electronically verify the information contained in the application. Applicants for registration as Associates may not authorize any other person to make such verification on their behalf. Each applicant for membership shall pay such application fee as the Membership Committee may prescribe from time to time.

          (ii) The electronic filing of the application or verification of the information contained in the application shall constitute:

            (A) a representation that the information supplied in the application is complete and accurate;

            (B) a representation that the applicant or Member has authorized the person filing the application to make such filing and all representations and agreements required by this paragraph; and

            (C) an express agreement by the applicant that, if admitted to NFA membership or registered as an Associate, the applicant shall become and remain bound by all NFA requirements as are then and thereafter in effect and that such agreement shall apply each time the applicant becomes a Member or Associate.

          (iii) An application may be returned by the Secretary of NFA without action if it is materially incomplete or materially inaccurate.

          (iv) Database Security.

            (A) No applicant, Member or Associate may access NFA's electronic registration and membership database until NFA has assigned it a unique identifying code and password;

            (B) Each applicant, Member and Associate is responsible for maintaining the security and confidentiality of its identifying code and password and those of the persons whom it authorizes, if permitted, to make electronic registration filings on its behalf. NFA's electronic registration and membership database shall record and store the identifying code of each person accessing NFA's database and shall logically associate in the database such identifying code with any electronic filing made by the person using such identifying code. The person whose identifying code is used to make an electronic filing will be deemed to have made such filing;

            (C) Each FCM, SD, MSP, RFED, IB, CPO or CTA applicant or Member shall make available any person it has authorized to make or actually performing duties related to electronic filings, for testimony in court or before the Commission, NFA or any contract market regarding the authentication, integrity or accuracy of any electronic filing; and

            (D) The ability to electronically access NFA's registration and membership database is a privilege and not a right. NFA may disable any person's identifying code and password and terminate the person's ability to access the database at any time, without notice or a hearing, in NFA's sole discretion, if NFA believes that the person has not complied with this Bylaw or any procedures that NFA establishes to implement this Bylaw.

          (v) Any required application fee shall be sent to the Secretary for processing, in accordance with such procedures as shall be adopted by the Membership Committee.

          (vi) As soon as practicable after the application is received and reviewed, the Secretary shall notify the applicant of the action taken (See paragraph (g) below).

        (g) Denial and Revocation.

          (i) If the President has reason to believe that: (1) an applicant for membership or registration with NFA as an Associate does not meet the qualifications set forth in this Chapter for NFA membership or association with a Member, as the case may be; (2) a Member or registered Associate does not meet the qualifications set forth in this Chapter for continuation as a Member or Associate; or (3) the person has submitted an intentionally incomplete, inaccurate or otherwise false application to NFA for membership or registration as an Associate, the President shall promptly so notify the person in writing and furnish a copy of the notice to the Membership Committee, setting forth the specific grounds for the determination. The person shall be given an opportunity to show in writing to the President that the qualifications are met, or that the application is not intentionally incomplete, inaccurate or false. If the person requests, or if the Membership Committee orders, a hearing shall be held before the Membership Committee or its designated Subcommittee, and a record shall be kept. Such designated Subcommittee shall consist of one member of the Membership Committee and two members of NFA's Hearing Committee, unless the applicant or Member is an SD or MSP, in which case at least one of the members of the designated Subcommittee shall also be an employee of an SD or MSP Member. The member of the Membership Committee sitting on each designated Subcommittee shall serve as the Chairman of the Subcommittee. At least one of the members of the designated Subcommittee shall not be an NFA Member or Associate or an employee of an NFA Member. Each member of the designated Subcommittee shall be appointed by a majority of the Membership Committee. The person may be represented at the hearing, and submit evidence in the proceeding, call and examine witnesses, examine the evidence upon which the President's determination was based, and, in the discretion of the Membership Committee or its designated Subcommittee, present written or oral argument. No member of the Membership Committee or a designated Subcommittee shall participate in a membership action if the member, or any person with whom the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).

          (ii) If a hearing before the Membership Committee is held, the Committee or Subcommittee shall make a final, written determination upon the record before it, setting forth the specific grounds for its determination. Such determination shall include the specific grounds for the denial, bar, expulsion or restriction; the findings made concerning those grounds; and an explanation of the result reached in light of the grounds of ineligibility found and the findings made. A copy of the determination shall promptly be sent to the person

          (iii) (A) The Respondent may appeal any adverse decision of the Membership Committee or Subcommittee issued under Bylaw 301(g)(ii) to the Appeals Committee by filing a written notice of appeal with NFA within 15 days after the date of the decision. The notice must describe those aspects of the membership action to which exception is taken, and must contain any request by the Respondent to present written or oral argument.

          (B) The Appeals Committee may also order review of any decision of the Membership Committee or Subcommittee issued under Bylaw 301(g)(ii). If such a review will be conducted, the Appeals Committee will give written notice to the Respondent within 15 days of the date of the decision. Such review may be conducted by the Appeals Committee:

            (1) on its own motion, or

            (2) pursuant to a petition filed by the Registration and Membership Department, the granting of which shall be discretionary with the Appeals Committee. The petition will state why the Registration and Membership Department is seeking review and must contain any request by the Registration and Membership Department to present written or oral argument.

          (C) The Respondent's filing of a notice of appeal under paragraph (A) above or the institution by the Appeals Committee of its own review under paragraph (B) above shall operate as a stay of the effective date of the membership order, until the Appeals Committee renders its decision.

          (D) No member of the Appeals Committee shall participate in the proceeding if the member participated in any prior stage of the membership proceeding (other than the review of a settlement offer) or if the member, or any person with which the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c). Except for good cause shown, the appeal or review shall be conducted solely on the record before the Membership Committee or Subcommittee, the written exceptions described in the notice of appeal under paragraph (A) above, and such written or oral arguments of the parties as the Appeals Committee may authorize.

          (E) If the Appeals Committee authorizes written argument, briefs shall be filed as follows unless otherwise ordered by the Appeals Committee:

            (1) the party required to submit the initial brief shall file it with NFA's Legal Docketing Department and serve it on the other parties to the appeal within 30 days after the Appeals Committee issues an order authorizing written argument;

            (2) the responding party shall file its brief with NFA's Legal Docketing Department and serve it on the other parties to the appeal within 30 days after service of the initial brief;

            (3) the party which filed the initial brief may file an answer to the responding brief with NFA's Legal Docketing Department and serve it on the other parties to the appeal within 10 days after service of the responding party's brief;

            (4) the initial brief or responding brief of any party shall not exceed 35 pages and the answer to the responding brief shall not exceed 10 pages, exclusive of any table of contents, table of cases, index and appendix containing transcripts of testimony, exhibits, rules and regulations; and

            (5) no other written argument on substantive issues raised on appeal will be accepted from the parties or considered by the Appeals Committee.

          (F) Promptly after reviewing the matter, the Appeals Committee shall issue a written and dated decision, based on the weight of the evidence. The decision shall include:

            (1) the specific grounds for the denial, bar, expulsion or restriction and its effective date;

            (2) the finding made by the Appeals Committee concerning those grounds;

            (3) an explanation for the results reached in light of the grounds for ineligibility found;

            (4) a statement that any person aggrieved by the membership action may appeal the action pursuant to Commission Regulations, Part 171, within 30 days of service; and

            (5) a statement that any person aggrieved by the membership action may petition the Commission for a stay of the effective date pursuant to Commission Regulations, Part 171, within 10 days of service.

          (G) The decision of the Appeals Committee shall be final 30 days after the date of service.

        (h) Suspension and Termination of Membership and Associate Membership.

        The membership or Associate membership of any person may be terminated or withdrawn as set forth below. Termination or withdrawal of a person's membership or associate membership shall not relieve the Member or Associate of any responsibility under the NFA Code of Arbitration, Member Arbitration Rules, Bylaws, Compliance Rules, Financial Requirements, Registration Rules, Interpretive Notices or Orders issued by the Executive Committee, Membership Committee, Appeals Committee, Hearing Committee or any designated Subcommittee or Panel of such Committees for activities prior to termination, or of the obligation to pay any dues, assessments, fines, penalties or other charges theretofore accrued and unpaid.

          (i) Termination of Temporary License.

          The termination of the temporary license of any Member or Associate shall also terminate such person's membership or associate membership unless such person remains otherwise eligible for membership under Bylaw 301(a).

          (ii) Withdrawal of Registration.

          The membership of any Member that withdraws all registrations under the Act shall be withdrawn without further prior notice.

          (iii) Termination of Employment as Associate.

          Each Member shall promptly file a Form 8-T, completed and filed in accordance with all pertinent instructions, notifying the Secretary of the termination of employment of any registered or pending Associate with the Member. Unless otherwise provided by these Bylaws or NFA Registration Rules, Members and applicants for membership must file their Form 8-Ts electronically by accessing NFA's registration and membership database in the manner provided by NFA. If such person is no longer listed as an Associate of any Member following such termination, the individual’s registration with NFA as an Associate shall terminate.

          (iv) Withdrawal from Membership or Application for Membership.

          A Member may request to withdraw its application for membership at any time before approval or request to withdraw from membership at any time by filing a Form 7-W, completed and filed in accordance with all pertinent instructions. Unless otherwise provided by these Bylaws or NFA Registration Rules, Members and applicants for membership must file their Form 7-Ws electronically by accessing NFA's registration and membership database in the manner provided by NFA. A request to withdraw an application for membership will become effective on the 30th day after the Member files the request, or earlier upon notice from NFA of the granting of such request. A request to withdraw from membership, including a deemed request to withdraw from membership, will become effective on the 30th day after the Member files or is deemed to have made the request, or earlier upon notice from NFA of the granting of such request, unless prior to the effective date NFA notifies the Member in writing that the request is denied because:

            (1) NFA has instituted a proceeding under Bylaw 301(g) or Part 3 of the Compliance Rules;

            (2) NFA is imposing or intends to impose terms or conditions upon such withdrawal from membership;

            (3) The Member is currently the subject of an investigation to determine, among other things, whether the Member has violated, is violating, or is about to violate NFA Bylaws, Compliance Rules, Financial Requirements, Registration Rules, Interpretive Notices or Orders issued by the Executive Committee, Membership Committee, Appeals Committee, Hearing Committee or any designated Subcommittee or Panel of such Committees;

            (4) NFA has requested, is requesting or intends to request from the Member further information pertaining to its request for withdrawal from membership; or

            (5) NFA has determined that it would be contrary to NFA's Articles, Bylaws, Compliance Rules, Financial Requirements, Registration Rules, Interpretive Notices or Orders issued by the Executive Committee, Membership Committee, Appeals Committee, Hearing Committee or any designated Subcommittee or Panel of such Committees, or to the public interest to permit such withdrawal from membership.

          (v) Failure to Notify of Address Change (See Bylaw 301(i)).

          (vi) Default in Payment of Dues or Assessment or Audit Fees (See Bylaw 1303).

          (vii) Suspension and Revocation.

          The membership of any Member or any person associated with a Member whose registration under the Act is suspended shall be suspended for the term of the registration suspension without further prior notice. The membership of any Member or any person associated with a Member whose registration under the Act is revoked shall terminate without further prior notice.

          (viii) Failure to Submit Annual Questionnaire.

          On an annual basis, NFA shall provide each NFA Member FCM for which NFA is the Designated Self-Regulatory Organization, RFED, IB, SD, MSP, CPO, CTA, and LTM with a questionnaire concerning its business activities. The Member shall complete the questionnaire and submit the completed questionnaire on the date specified thereon. NFA shall deem the failure to file the completed questionnaire within 30 days following such date a request to withdraw from NFA membership, and shall notify the Member accordingly.

        (i) Name and Address.

          (i) Each Member shall at all times register and maintain with the Secretary its correct name and principal address, and the correct name and address of each registered Associate employed by the Member. Except as provided in subsection (ii) below, the principal address of each Member and the address of each registered Associate currently on file with NFA shall be deemed by NFA the correct address for delivery to the Member or Associate of any written communication, document or notice from NFA. Delivery of any written communication, document or notice shall be complete upon mailing, delivery to a generally recognized overnight courier service or delivery to a messenger service. The failure of a Member to notify NFA of a change in the Member's principal address shall constitute grounds for summary suspension or termination of the NFA membership of such Member by order of the President on seven days' written notice.

          (ii) Each Member may provide to NFA, and if provided, shall maintain, in the manner required by NFA, one or more email addresses for the purpose of receiving communications, documents or notices from NFA. Unless a different method of delivery is specifically required, NFA may deliver any communication, document or notice to the email address or addresses currently on file. The email address or addresses currently on file shall be deemed by NFA the correct address or addresses for delivery to the Member of the communication, document or notice by email. Delivery of any communication, document or notice by email shall be complete upon sending.

        (j) Eligibility to Conduct Forex Activities.

          (i) Any Member that is registered with the Commission as an FCM, RFED, IB, CPO, or CTA and engages in forex activities must be approved as a forex firm by NFA.

            (A) In addition to being approved by NFA as a forex firm, an RFED or an FCM that is a Forex Dealer Member must also be designated by NFA as an approved Forex Dealer Member.

              (1) No FCM may be designated as an approved Forex Dealer Member unless such FCM provides NFA with satisfactory evidence that it meets the requirements in NFA Financial Requirements Section 11.

          (ii) Any person associated with a Member that is registered with the Commission as an FCM, RFED, IB, CPO, or CTA and engages in forex activities must be approved as a forex associated person by NFA in order to engage in forex activities on behalf of such Member.

          (iii) No Member may be approved as a forex firm unless at least one of its principals is registered as an "associated person" and approved as a forex associated person.

            (A) If any Member that has been approved as a forex firm fails to have at least one principal that is registered as an "associated person" and approved as a forex associated person, then NFA shall deem such failure as a request to have the approval of the Member as a forex firm withdrawn and shall notify that Member accordingly.

          (iv) Any request for designation as an approved Forex Dealer Member or approval as a forex firm or forex associated person must be filed electronically through NFA's Online Registration System.

          (v) Any individual applying for designation as an approved Forex Dealer Member or approval as a forex firm or forex associated person shall not be granted designation as an approved Forex Dealer Member or approval as a forex firm or forex associated person unless:

            (A) The applicant has satisfied the proficiency requirements under NFA Registration Rule 401(a) or 401(e) and:

              (1) NFA has received satisfactory evidence that the applicant has taken and passed the Retail Off-Exchange Forex Examination (Series 34) on a date which is no more than two years prior to the date the application is received by NFA;

              (2) NFA has received satisfactory evidence that the applicant has taken and passed the Retail Off-Exchange Forex Examination (Series 34) and since the date the applicant last passed such examination, there has been no period of two consecutive years during which the applicant has not been either registered as a FB, AP or principal of an FCM, RFED, IB, CTA, CPO, or LTM; or

              (3) the applicant was duly registered under the Act as a FB, AP or sole proprietor FCM, IB, CTA, CPO or LTM on May 22, 2008, and there has been no period of two consecutive years since May 22, 2008, during which the applicant has not been registered as a FB, AP or principal of an FCM, RFED, IB, CTA, CPO or LTM.

        (k) Withdrawal of Designation as an Approved Forex Dealer Member or Approval as a Forex Firm.

        A Member may request that its designation, or pending application for designation, as an approved Forex Dealer Member or approval, or pending application for approval, as a forex firm be withdrawn by filing such a request through NFA's Online Registration System. Such a request shall become effective on the 30th day after the Member files the request, or earlier upon notice from NFA of the granting of such request.

          (i) Withdrawal of the approval of a Member as a forex firm shall also result in the withdrawal of the designation of the Member as an approved Forex Dealer Member.

        (l) Eligibility to Conduct Swaps Activities.

          (i) Any Member that is registered with the Commission as an FCM, IB, CPO, or CTA and engages in activities involving swaps subject to the jurisdiction of the CFTC must be approved as a swaps firm by NFA.

          (ii) Any person associated with a Member that is registered with the Commission as an FCM, IB, CPO, or CTA and engages in activities involving swaps subject to the jurisdiction of the CFTC must be approved as a swaps associated person by NFA in order to engage in swaps activities on behalf of such Member.

          (iii) No Member may be approved as a swaps firm unless at least one of its principals is registered as an "associated person" and approved as a swaps associated person.

          (iv) If any Member that has been approved as a swaps firm fails to have at least one principal that is registered as an "associated person" and approved as a swaps associated person, then NFA shall deem such failure as a request to have the approval of the Member as a swaps firm withdrawn and shall notify that Member accordingly.

          (v) Any request for approval as a swaps firm or swaps associated person must be filed electronically through NFA's Online Registration System.

        (m) Withdrawal of Approval as a Swaps Firm.

        A Member may request that its approval, or pending application for approval, as a swaps firm be withdrawn by filing such a request through NFA's Online Registration System. Such a request shall become effective on the 30th day after the Member files the request, or earlier upon notice from NFA of the granting of such request.

        (n) Notice.

        NFA may provide any notice required by Bylaw 301 electronically unless written notice is specifically required. Notices provided electronically shall be complete upon display in NFA's Online Registration System. Notices provided in writing shall be complete upon mailing.


        BYLAW 302. ADMISSION TO MEMBERSHIP, OR REGISTRATION AS AN ASSOCIATE, ON A CONDITIONAL BASIS.

        The Membership Committee may admit an applicant to membership, or grant an applicant registration as an Associate, subject to such terms and conditions as the Committee deems appropriate.


        BYLAW 303. RIGHTS AND LIABILITIES OF MEMBERS.

        The private property of the Members shall not be subject to the payment of NFA's debts or liabilities to any extent whatsoever, except that Members shall be liable to NFA for dues, assessments, fees, and similar charges imposed on them by NFA. With the Board's approval, a Member may receive compensation for services rendered to NFA and reimbursement for expenses, including overhead, reasonably incurred on behalf of NFA, and may be repaid for loans or other credit extended by the Member to NFA.


        BYLAW 304. TRANSFER OF MEMBERSHIP.

        Membership in NFA shall not be transferable or assignable.


        BYLAW 305. REGISTRATION RULES.

        [Adopted effective July 28, 1983. Effective dates of amendments: November 29, 1983; May 4, 1984; November 5, 1984; December 3, 1984; December 16, 1984; March 1, 1985; September 30, 1985; January 28, 1986; June 13, 1986; September 23, 1986; January 2, 1987; March 26, 1987; July 1, 1987; April 4, 1988 and August 1, 1994.]

        Subject to Articles III and XI and Bylaw 1506, the Board shall adopt Registration Rules in accordance with which NFA shall perform the portion of the registration functions under the Act which it is required or authorized by the Commission to perform pursuant to Section 8a(10) or Section 17(o) of the Act and in accordance with which NFA shall determine proficiency for purposes of determining fitness to be registered under the Act (except with respect to floor brokers and floor traders) and for purposes of determining membership qualification under Bylaw 301(d), which rules shall be deemed a part of these Bylaws.


        BYLAW 306. FOREX DEALER MEMBERS.

        [Adopted effective June 28, 2002. Effective dates of amendments: December 1, 2003; June 13, 2005; February 13, 2007; October 18, 2010; and October 1, 2011.]

        Members of NFA are Forex Dealer Members if they are the counterparty or offer to be the counterparty to forex transactions (as defined in Bylaw 1507(b)).


        Chapter 4. Member Meetings and Elections

        BYLAW 401. PLACE OF MEETING.

        [Effective date of amendments: August 1, 2016.]

        Meetings of NFA Members may be held at such place, either in Delaware or elsewhere, as may be designated by the Board or the officers calling the meeting. If no designation is made, the place of meeting shall be NFA's principal office in Chicago.


        BYLAW 402. ANNUAL MEETINGS.

        [Effective date of amendments: August 1, 2016.]

        The annual meeting of the Members shall be held on the first Tuesday in February of each year or at such other date and time as determined by the Board, for the election of Directors elected by Members and the transaction of such business as may come before the meeting. The Board or Executive Committee may postpone, reschedule or cancel any meeting of Members previously scheduled by the Board.


        BYLAW 403. SPECIAL MEETINGS.

        [Effective date of amendments: August 1, 2016.]

        Special meetings of the Members may be called for any purpose or purposes by the Chairman, the President or the Board. Special meetings shall also be called by the President when requested in writing by at least 10 percent of the Members. This request must state the purpose or purposes for which the special meeting is to be called. The business transacted at the meeting shall be limited to the purpose stated in the notice. The Board or Executive Committee may postpone, reschedule or cancel any meeting of Members previously scheduled by the Chairman, the President or the Board.


        BYLAW 404. NOTICE OF MEETINGS.

        [Effective date of amendments: August 1, 2016.]

        A notice stating the place, day and hour of any meeting of Members and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 40 days before the date of the meeting, either personally, by U.S. mail or, subject to the requirements of applicable law, by electronic transmission by or at the direction of the Secretary, to each Member entitled to vote at the meeting. If mailed, the notice shall be deemed delivered when deposited in the U.S. mail, addressed to the Member at his or her address as it appears on NFA records, with postage prepaid. Attendance at a meeting by a Member shall constitute waiver of notice of such meeting, except when the Member attends a meeting for express purposes of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.


        BYLAW 405. VOTING; QUORUM.

        [Effective date of amendments: August 1, 2016.]

        (a) A quorum at any meeting of the Members shall be constituted as described in (b) below. If a quorum is not present at a meeting, the Members in attendance may act to adjourn the meeting. Each Member entitled to vote at a meeting of Members may vote in person at the meeting by ballot or may authorize another person or persons to act for such Member by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

        (b)(i) For any matter that requires a separate vote by membership category or categories, but not all membership categories voting together as a single class, at any meeting of the Members, the lesser of fifty (50) Members in such membership category or categories or five percent (5%) of the total number of Members in such membership category or categories shall constitute a quorum for that membership category.

        (ii) For all other matters, 51% of the total number of Members shall constitute a quorum.


        BYLAW 406. ELECTIONS.

        [Effective dates of amendments: February 7, 1986; January 1, 1990; August 3, 1990; October 16, 1992; October 15, 2001; October 9, 2007; February 20, 2014; December 15, 2014 and August 1, 2016.]

        The Annual Election shall be held at the annual meeting of Members, at which the contested vacancies on the Board and Nominating Committee shall be filled. Before the October 15 preceding the election, the Secretary shall:

          (a) notify all Members in the FCM and LTM; SD, MSP and RFED; IB; CPO and CTA categories of the elected Directors and the members of the Nominating Committee whose terms will expire at the Annual Election, and

          (b) request the submission to the Nominating Committee of the names of eligible persons to fill those positions.

        Before the November 20 preceding the election, the Nominating Committee shall submit its list of nominees for the positions to the Secretary, who shall promptly notify the Members of the nominations. Other nominations may be made by petition, as prescribed in the Articles. Each petition must identify the position to which the nomination pertains. Petitions must be received by the Secretary within 21 days of the issuance of the Secretary's notification of the candidates proposed by the Nominating Committee. Promptly after the expiration of the period within which petitions may be submitted, the Secretary shall notify the Members of all of the candidates for Director and members of the Nominating Committee. In the event of a contested election in any of the FCM and LTM; SD, MSP and RFED; IB; or CPO and CTA categories, the Secretary shall cause notice of the meeting wherein such election shall be considered to be sent to all Members in that category by December 31. Promptly after December 31 of the year immediately preceding the election, the Secretary shall notify the contract market Members that shall have representatives on the Board during the current calendar year. Provided, however, that if an election is held pursuant to Article VII, Section 2(a)(ii)(b) or Section 2A(a)(ii)(b), then the Secretary shall request the contract market Members eligible to have a representative in accordance with Article VII, Section 2(a)(ii)(b) or Section 2A(a)(ii)(b), respectively, to nominate eligible persons to represent such contract market Members. In the event of a contested election in the contract market category, the Secretary shall cause notice of the meeting wherein such election shall be considered to be sent to all contract market Members eligible to vote in accordance with Article VII, Section 2(a)(ii)(b) or Section 2A(a)(ii)(b), respectively, by January 10.


        BYLAW 407. RESERVED.

        [Effective dates of amendments: October 15, 2001; and February 20, 2014.]


        BYLAW 408. RECORD DATE.

        [Adopted effective August 1, 2016]

        (a) Member Meetings.

        In order that NFA may determine the Members entitled to notice of any meeting of Members or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the Members entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining Members entitled to notice of or to vote at a meeting of Members shall be at the close of business on the day prior to the day on which notice is given, or, if notice is waived, at the close of business on the day prior to the day on which the meeting is held. A determination of Members of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of Members entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for Members entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of Members entitled to vote in accordance herewith at the adjourned meeting.

        (b) Written Consent.

        Unless otherwise restricted by the Articles, in order that NFA may determine the Members entitled to express consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date for determining Members entitled to express consent to corporate action in writing without a meeting is fixed by the Board, (i) when no prior action of the Board is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to NFA in accordance with applicable law, and (ii) if prior action by the Board is required by law, the record date for such purpose shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.


        BYLAW 409 EXECUTIVE REPRESENTATIVE.

        [Adopted effective August 1, 2016]

        (a) Each Member shall designate, in a form and manner required by NFA, one (1) individual as the Member's Executive Representative. The Executive Representative shall have the sole authority on behalf of the Member to sign petitions to nominate candidates for Director or Nominating Committee positions in accordance with Article VII, Section 3(b)(1) and to vote or authorize another person or persons to act for such Member by proxy at any meeting of Members. All notices of meetings of Members shall be delivered to the Executive Representative.

        (b) In the event that a Member fails to designate an Executive Representative, the Member's Membership Contact listed on the Member's Form 7-R or any amendment thereto shall be deemed to be the Member's Executive Representative.


        Chapter 5. Board of Directors

        BYLAW 501. GENERAL POWERS AND DUTIES.

        [Effective date of amendments: August 1, 2016.]

        NFA's property, business and affairs shall be managed by or under the direction of the Board, and the Board may exercise all such powers of NFA as are directed, required or permitted by law, the Articles or these Bylaws to be exercised by the Board.


        BYLAW 502. TERM OF OFFICE.

        Each Director shall hold office for the term prescribed in the Articles and until his successor shall have been duly elected and qualified, or until the Director's death, resignation or removal. Directors need not be Delaware residents.


        BYLAW 503. RESERVED.


        BYLAW 504. RESERVED.


        BYLAW 505. RESIGNATIONS.

        [Effective date of amendments: August 1, 2016.]

        Any Director may resign at any time by giving written notice, or notice by electronic transmission, to the Chairman, President or Secretary. The resignation shall take effect at the time set forth therein, and, unless otherwise specified therein, the acceptance of the resignation shall not be necessary to make it effective.


        BYLAW 506. REGULAR MEETINGS.

        The Board's regular annual meeting shall be held in February, for the election of Officers and the appointment of Committee members. The date, time and place of the meeting shall be fixed by the Board. The Board may by resolution specify the time and place, either in Delaware or elsewhere, for the holding of additional regular meetings without notice other than such resolution.


        BYLAW 507. SPECIAL MEETINGS.

        [Effective dates of amendments: August 16, 1993; October 15, 2001; November 16, 2009, February 20, 2014 and August 1, 2016.]

        (a) General.

        Special meetings of the Board shall be held at the request of the Chairman, the President, or any 10 Directors. The date and place of the meeting shall be determined by the Chairman and specified in the notice of the meeting.

        (b) Notice of Emergencies.

        Except in the event of an emergency (as defined below), the Chairman shall cause notice of any special meeting of the Board to be given at least 48 hours before the time at which the meeting is to be held.

        Notices to Directors may be given in writing and delivered personally or mailed to the Directors at their addresses appearing on the books of NFA or may be given by telecopier, telephone or other means of electronic transmission.

        Attendance of a Director at the meeting shall constitute a waiver of notice of the meeting, except where a Director attends a meeting exclusively for the limited purpose of objecting, at the beginning of the meeting, to the transaction of any business thereat on the ground that the meeting is not lawfully called or convened.

        In the event of an emergency (as defined herein), the Chairman or President may call a meeting on one-hour notice to all Directors. Such notice may be given by telephone, electronic transmission or other lawful means. The business of the meeting shall be limited to the emergency. A quorum shall consist of 1/3 of the Directors, provided there is present at least one contract market Director, one FCM, LTM or IB Director; one SD, MSP or RFED Director; one CPO or CTA Director; and one Public Representative Director. For purposes of this Bylaw, an emergency shall exist when the Chairman or President determines that, because of an unusual, unforeseeable and adverse circumstance, it is necessary to hold a meeting on one hour notice.


        BYLAW 508. ADJOURNMENT; LACK OF QUORUM.

        [Effective date of amendments: August 1, 2016.]

        In the absence of the quorum, a majority of the Directors present and voting may adjourn the meeting to a day certain and, except in emergencies, the Secretary shall give all absent Directors 48 hours notice of such adjourned date.


        BYLAW 509. MANNER OF VOTING BY DIRECTORS.

        [Effective date of amendments: August 1, 2016.]

        Any Director (or any member of a committee designated by the Board) may participate in a meeting thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Bylaw 509 shall constitute presence in person at such meeting.


        BYLAW 510. INFORMAL ACTION BY DIRECTORS.

        [Effective date of amendments: August 1, 2016.]

        Any action that must or may be taken at a Board meeting may be taken without a meeting if a consent in writing or by electronic submission, setting forth the action so taken, shall be signed or given by all Directors then in office. This consent shall constitute a waiver of notice and meeting and shall have the same effect as a unanimous vote of all Directors at a meeting.


        BYLAW 511. INTERPRETATION OF NFA REQUIREMENTS.

        [Effective dates of amendments: February 20, 2014.

        The Board shall have authority to interpret any NFA Requirement. Any such interpretation of the Board shall be final and conclusive.


        BYLAW 512. VOTING ON FLOOR BROKER OR FLOOR TRADER REGISTRATION RESPONSIBILITIES.

        [Adopted effective September 23, 1986. Effective dates of amendments: April 26, 1993.]

        NFA will not seek or accept any authority in connection with the registration of floor brokers or floor traders that exceeds the authority granted to NFA in the initial Commission orders authorizing NFA to perform certain floor broker and floor trader registration functions or any other authority sought or accepted by NFA under the terms of this Bylaw, without the consent of contract market directors representing two-thirds of contract market Members.


        BYLAW 513. DIRECTORS ACTING AS COUNSEL IN NFA PROCEEDINGS.

        [Adopted effective July 1, 1987.]

        No Director shall represent or appear as counsel on behalf of any person involved in an NFA investigation or a registration, membership or disciplinary proceeding undertaken by NFA.


        BYLAW 514. PROHIBITION AGAINST USE OF NON-PUBLIC INFORMATION.

        [Adopted effective June 15, 1988. Effective dates of amendments: December 4, 2000.]

        No Director or functional equivalent thereof shall use or disclose material, non-public information, obtained as a result of participation on the Board of Directors or any subcommittee of the Board of Directors, for any purpose other than the performance of official duties as a Director or subcommittee member.


        BYLAW 515. QUALIFICATIONS OF DIRECTORS.

        [Adopted effective June 2, 1990. Effective dates of amendments: December 10, 1993.]

          (a) No individual shall be eligible to serve as a Director if such person:

            (i) is subject to any of the disqualifications set forth in CFTC Regulation 1.63(b);

            (ii) has been convicted of a felony within the prior 10 years; or

            (iii) is subject to a Member Responsibility Action or Associate Responsibility Action which is currently in effect.

          (b) In the event that a Director becomes disqualified after election to the Board, the vacancy shall be filled as prescribed by Article VII, Section 8. If the sanction is stayed or overturned on appeal before the vacancy is filled, the Director shall be entitled to resume his seat on the Board.

          (c) NFA shall publish a list of those Rules which, if violated, would constitute a disciplinary offense as defined in CFTC Regulation 1.63(a)(6)(i).


        BYLAW 516. VOTING BY INTERESTED DIRECTORS

        [Adopted effective March 12, 1999.]

        No Director may deliberate or vote on any matter that the Director is prohibited from voting on by CFTC Regulation 1.69(b)(1)(i). A director who is prohibited from deliberating or voting on a matter must disclose to NFA staff both the prohibition and the reason for the prohibition before the Board considers the matter.


        Chapter 6. Officers

        BYLAW 601. OFFICERS.

        The officers of NFA shall consist of a Chairman of the Board, a Vice Chairman of the Board, a President, a Secretary, and a Treasurer. The Chairman and Vice Chairman shall be elected by the Board at its regular annual meeting in each year, to hold office until the next regular annual meeting of the Board or until their respective successors are elected and qualified. The Board shall appoint a President, a Secretary, and a Treasurer. Vacancies occurring in any office by death, resignation, removal or otherwise shall be filled by the Board, and such replacement officers shall serve, in the case of the Chairman and Vice Chairman, until their successors are elected, or, in the case of other officers, until their successors are appointed. No single individual may hold any two of the following positions concurrently: Chairman, Vice Chairman, President and Secretary. The Board may provide for such other offices and may appoint incumbents thereto, and assign their respective duties to them, from time to time, as the Board may deem advisable. In its discretion, the Board may execute, on behalf of NFA, contracts of employment with appointed officers.


        BYLAW 602. CHAIRMAN AND VICE CHAIRMAN.

        [Effective date of amendments: August 1, 2016.]

        The Chairman, and in the Chairman's absence the Vice Chairman, shall preside at all meetings of the Members and of the Board. In the absence of both, the Board shall elect a presiding officer for the meeting and, in the absence of such election, the Members shall elect a presiding officer for the meeting.


        BYLAW 603. PRESIDENT.

        The President shall be Chief Executive Officer. As Chief Executive Officer, the President shall have general and active management of NFA business. The President shall see that all orders and resolutions of the Board are carried into effect and may execute bonds, mortgages, and other contracts. The President shall have general superintendence of all other appointed NFA officers and all employees, and shall see that their duties are properly performed. The President shall submit a report of the operations of NFA for the preceding fiscal year to the Members at the annual meeting, and from time to time shall report to the Board all matters which the interests of NFA may require to be brought to its notice.


        BYLAW 604. SECRETARY.

        The Secretary shall keep or cause to be kept full minutes of all meetings of the Members, the Board and Committees and shall attend the sessions of the Board and act as clerk thereof and record all the acts and votes and the minutes of all proceedings in a book to be kept for that purpose. The Secretary shall see that all notices are duly given in accordance with these Bylaws or law, and shall perform such other duties as may be from time to time assigned. The Secretary shall have custody of the corporate seal and shall affix the same to all papers and documents whenever the seal shall be required to be so affixed. The Secretary shall have custody of and properly keep or cause to be kept all the records and books of NFA.


        BYLAW 605. TREASURER.

        The Treasurer shall keep full and correct account of receipts and disbursements in the books belonging to NFA, and shall deposit all moneys and equivalents to the credit of NFA, in such financial institutions as may be designated by the Board. The Treasurer shall dispose of NFA funds as may be ordered by the Board by general resolution or in specific instances, taking proper vouchers for such disbursements, and shall render to the President and the Board, whenever they may require it, an account of all transactions as Treasurer and of NFA's financial condition.


        BYLAW 606. RESIGNATIONS.

        Any officer may resign at any time by giving written notice to the Board or the Secretary. Any such resignation shall take effect at the time set forth therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.


        BYLAW 607. REMOVAL.

        The Chairman, Vice Chairman, President, Secretary and Treasurer may be removed by the Board whenever in its judgment the best interests of NFA will be served thereby. Removal of the Chairman and Vice Chairman shall be by the vote of a majority of the total number of Directors then in office. Removal of the President shall be by the vote of not less than two-thirds of the total number of Directors then in office. Removal of the Secretary and Treasurer shall be by a majority vote of the Directors present and voting at any meeting where a quorum is present. Other officers may be removed in the same manner as the Secretary or Treasurer, or by any superior officer upon whom such removal power has been conferred by Board resolution.


        Chapter 7. Committees

        BYLAW 701. MEMBERSHIP COMMITTEE.

        [Effective dates of amendments: July 1, 1987; October 15, 2001; February 15, 2005; November 18, 2009, February 20, 2014, and August 1, 2016.]

        There shall be a Membership Committee, consisting of five Directors, and at least one shall be a Public Representative (See Article XVIII). A majority of the Committee members shall constitute a quorum, except that in the case of a Subcommittee, a quorum shall consist of a majority of such Subcommittee members. The Committee members shall be nominated by the President and appointed by the Board. The President and the Board shall endeavor to nominate and appoint Directors and persons who reflect the various categories of Members described in the Articles.

        The Committee or its designated Subcommittee shall review actions taken by the President pursuant to the President's authority under Chapter 3 to make the initial determination regarding: (a) applicants for membership in NFA or registration as Associates, and (b) continued eligibility for such membership or registration and shall conduct adverse registration actions as provided in Part 500 of the Registration Rules.

        Each Committee member shall serve for two years or until the member's successor is appointed and qualified, or until the member's death, resignation, ineligibility or removal. A Committee vacancy shall be filled by the Board. A Committee member may be removed by the Board whenever, in its judgment, the best interests of NFA will be served thereby.


        BYLAW 702. APPEALS COMMITTEE.

        [Effective dates of amendments: July 1, 1987; March 15, 1994; October 15, 2001; January 1, 2005; November 16, 2009; February 20, 2014; and August 1, 2016.]

        There shall be an Appeals Committee, consisting of five Directors as follows: one Contract Market Director; one FCM, LTM, or IB Director; one CPO/CTA Director; one SD, RFED or MSP Director; and one Public Representative Director (See Article XVIII). A majority of the Committee members shall constitute a quorum. The Committee members shall be nominated by the President and appointed by the Board. The President and the Board shall endeavor to nominate and appoint Directors who reflect the various categories of Members described in the Articles.

        The Committee shall hear and decide appeals from and reviews of decisions in disciplinary cases by the Business Conduct Committee or the Hearing Committee under the Compliance Rules and decisions by the Membership Committee or its designated Subcommittee in membership cases under Bylaw 301(g).

        Each Committee member shall serve for two years, or until the member's successor is appointed and qualified, or until the member's death, resignation, ineligibility or removal. A Committee vacancy shall be filled by the Board. A Committee member may be removed by the Board whenever, in its judgment, the best interests of NFA will be served thereby.


        BYLAW 703. ADVISORY COMMITTEES.

        [Effective dates of amendments: January 28, 1986; November 9, 1988; and August 1, 2016.]

        The Board shall appoint Advisory Committees, not having or exercising the authority of the Board, including a Committee to advise the Board on FCM matters, a Committee to advise the Board on matters relating to CPOs and CTAs, a Committee to advise the Board on the matters relating to IBs, and a Swap Participant Committee to advise the Board on matters relating to SDs and MSPs. No person then serving as a member of the Board shall simultaneously serve as a member of any NFA Advisory Committee.

        Each member of an Advisory Committee shall be nominated by the President and serve for three years, except that the terms initially established shall be staggered, or until the member's successor is appointed and qualified, or until the member's death, resignation, ineligibility or removal. A vacancy in an Advisory Committee shall be filled by the Board. A Committee member may be removed by the Board whenever in its judgment the best interests of NFA will be served thereby.


        BYLAW 704. BUSINESS CONDUCT COMMITTEE.

        [Effective dates of amendments: July 1, 1987; June 15, 1988; March 15, 1994; January 1, 2005; February 20, 2014; and August 1, 2016.]

        There shall be a Business Conduct Committee, consisting of nine individuals who shall be Members, persons connected therewith or members of the public, as follows: four persons affiliated with FCMs, IBs, LTMs, CTAs or CPOs; two persons affiliated with SDs, RFEDs or MSPs; and three persons who are not NFA Members or Associates or employees of NFA Members. A majority of the Business Conduct Committee members eligible to participate shall constitute a quorum, except that in the case of a Panel (See Compliance Rule 3-11) a quorum shall consist of a majority of such Panel members. The members of the Business Conduct Committee shall be nominated by the President and appointed by the Board. The President and the Board shall endeavor to nominate and appoint individuals who reflect the various categories of NFA Members and members of the public.

        Each member of the Business Conduct Committee shall serve for three years, or until the member's death, resignation, ineligibility or removal. A vacancy in the Business Conduct Committee shall be filled by the Board. A Business Conduct Committee member may be removed by the Board whenever, in its judgment, the best interests of NFA will be served thereby.


        BYLAW 705. FINANCE COMMITTEE.

        [Adopted effective March 12, 1984. Effective dates of amendments: June 13, 1986; January 1, 1990; November 16, 2009; February 20, 2014; and August 1, 2016.]

        There shall be a Finance Committee not having or exercising any authority of the Board, to advise the Executive Committee and Board on matters of NFA financial policy including the establishment of major plans and priorities regarding the commitment and expenditure of NFA funds and the establishment of dues, assessments, fees and other charges upon Members and others. The Finance Committee shall consist of eight members as follows:

        (a) NFA's President;

        (b) NFA's Vice Chairman (who shall act as Chairman of the Finance Committee); and

        (c) Six (6) other Directors as follows who shall not also be members of the Executive Committee and who shall be nominated by the Executive Committee and appointed by the Board at the first Board meeting in each fiscal year:

          (i) One (1) Director representing contract markets;

          (ii) One (1) Director representing FCMs, LTMs or IBs;

          (iii) One (1) Director representing SDs, RFEDs or MSPs;

          (iv) One (1) Director representing CPOs or CTAs; and

          (v) Two (2) Directors who are Public Representatives (See Article XVIII).

        The members of the Finance Committee described in paragraph (c) above shall serve for one year, or until the member's death, resignation, ineligibility or removal. A vacancy in the Finance Committee shall be filled by the Board. A Finance Committee member may be removed by the Board whenever, in its judgment, the best interests of NFA will be served thereby.


        BYLAW 706. RESERVED.


        BYLAW 707. HEARING COMMITTEE.

        [Adopted effective March 15, 1994. Effective dates of amendments: January 1, 2005 and August 1, 2016.]

        There shall be a Hearing Committee, consisting of at least 15 individuals who shall be Members, persons connected therewith or members of the public. A majority of the Hearing Committee members shall constitute a quorum, except in the case of a Panel (See Compliance Rule 3-7) a quorum shall consist of a majority of such Panel members. The members of the Hearing Committee shall be nominated by the President and approved by the Board. The President and the Board shall endeavor to nominate and appoint individuals who reflect the various categories of NFA Members and members of the public. At least one-third of the members of the Hearing Committee shall not be NFA Members or Associates or employees of NFA Members.

        Each member of the Hearing Committee shall serve for three years, or until the member's death, resignation, ineligibility or removal. A vacancy in the Hearing Committee shall be filled by the Board. A Hearing Committee member may be removed by the Board whenever, in its judgment, the best interests of NFA will be served thereby.


        BYLAW 708. QUALIFICATIONS AND OBLIGATIONS OF MEMBERS OF NFA COMMITTEES.

        [Adopted effective June 2, 1990. Effective dates of amendments: December 10, 1993; March 21, 1994; March 12, 1999 and December 4. 2000.]

          (a) No individual shall be eligible to serve as a member of any NFA Committee or any subcommittee thereof if such person:

            (i) is subject to any of the disqualifications set forth in CFTC Regulation 1.63(b);

            (ii) has been convicted of a felony within the prior 10 years; or

            (iii) is subject to a Member Responsibility Action or Associate Responsibility Action which is currently in effect

          (b) No member or functional equivalent thereof of any NFA Committee or subcommittee shall use or disclose material, non-public information, obtained as a result of participation on the Committee or subcommittee, for any purpose other than the performance of official duties as a member of the Committee or subcommittee thereof.

          (c) No member of any NFA Committee or subcommittee may deliberate or vote on any matter that the member is prohibited from voting on by CFTC Regulation 1.69(b)(1)(i). A member who is prohibited from deliberating or voting on a matter must disclose to NFA staff both the prohibition and the reason for the prohibition before the Committee or subcommittee considers the matter.


        Chapter 8. Arbitration

        BYLAW 801. CODE OF ARBITRATION.

        Subject to Articles III and XI and Bylaw 1506, the Board shall adopt rules constituting a Code of Arbitration which rules shall be deemed a part of these Bylaws.


        BYLAW 802. QUALIFICATIONS OF MEMBERS OF ARBITRATION PANELS.

        [Adopted effective June 2, 1990.]

          (a) No individual shall be eligible to serve as a Panel member if such person:

            (i) is subject to any of the disqualifications set forth in CFTC Regulation 1.63(b);

            (ii) has been convicted of a felony within the prior 10 years; or

            (iii) is subject to a Member Responsibility Action or Associate Responsibility Action which is currently in effect.

          (b) The Secretary may disqualify an individual from serving on a Panel for conditions other than those set forth in paragraph (a) of this Bylaw and may adopt eligibility standards in addition to those set forth in paragraph (a) of this Bylaw.

          (c) Service on a Panel by an individual who is ineligible for service pursuant to this Bylaw shall not constitute grounds to challenge an award rendered by the Panel.


        Chapter 9. Enforcement and Discipline

        BYLAW 901. COMPLIANCE RULES.

        Subject to Articles III and XI and Bylaw 1506, the Board shall adopt compliance rules for the enforcement of NFA requirements and the disciplining of Members and Associates for violating those requirements, which rules shall be deemed a part of these Bylaws.


        Chapter 10. Financial Requirements

        BYLAW 1001. FINANCIAL REQUIREMENTS.

        [Effective dates of amendments: July 27, 1983.]

        Subject to Articles III and XI and Bylaw 1506, the Board shall adopt minimum financial and related reporting requirements, which rules shall be deemed a part of these Bylaws.


        Chapter 11. Doing Business with Non-Members

        BYLAW 1101. PROHIBITION.

        [Effective dates of amendments: July 27, 1983; January 1, 1990; August 21, 2001; and August 1, 2016.]

        (a) No Member may carry an account, accept an order or handle a transaction in commodity futures contracts for or on behalf of any non-Member of NFA, or suspended Member, that is required to be registered with the Commission as an FCM, IB, CPO, CTA or LTM, and that is acting in respect to the account, order or transaction for a customer, a commodity pool or participant therein, a client of a commodity trading advisor, or any other person, unless:

          (i) such non-Member of NFA is a member of another futures association registered with the Commission under Section 17 of the Act, or is exempted from this prohibition by Board resolution;

          (ii) such non-Member of NFA is registered with the Commission as an FCM or IB under Section 4f(a)(2) of the Act and the account, order, or transaction involves only security futures products; or

          (iii) such suspended Member is exempted from this prohibition by the Appeals Committee.

        (b) No Member may accept orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member of NFA, or suspended Member, that is required to be registered with the Commission as an LTM, unless:

          (i) such non-Member is a member of another futures association registered under Section 17 of the Act, or is exempted from this prohibition by Board resolution; or

          (ii) such suspended Member is exempted from this prohibition by the Appeals Committee.


        BYLAW 1102. EFFECTIVE DATE OF PROHIBITION.

        [Effective date of amendments: August 1, 2016.]

        The Board may establish such effective date or dates for Bylaw 1101, as to any category or subcategory of persons or programs, as it deems appropriate in light of NFA resources and the prudent initiation of particular NFA operations and programs.


        Chapter 12. Property and Investments

        BYLAW 1201. PROPERTY.

        All property, whether real, personal or mixed, received by NFA shall be held by NFA or disposed of by it on such terms and conditions not inconsistent with the Articles as the Board shall determine.


        BYLAW 1202. INVESTMENTS.

        Unless otherwise specified by the terms of a particular gift, bequest, devise, grant or other instrument, NFA funds may be invested, from time to time, in such manner as the Board may deem advantageous without regard to restrictions applicable to trustees or trust funds.


        Chapter 13. Schedule of Dues and Assessments

        BYLAW 1301. SCHEDULE OF DUES AND ASSESSMENTS.

        [Effective dates of amendments: January 10, 1983; July 27, 1983; November 29, 1983; February 27, 1984; April 1, 1984; June 4, 1985; January 28, 1986; July 1, 1988; May 22, 1989; July 1, 1989; January 1, 1990; July 1, 1991; July 1, 1993; January 1, 1994; July 1, 1994; January 1, 1995; January 1, 1998; July 1, 1999; July 1, 2001; October 15, 2001; January 1, 2002; April 1, 2002; July 1, 2002; September 9, 2002; January 1, 2003; September 15, 2003; December 1, 2003; July 1, 2004; January 1, 2005; April 30, 2006; December 4, 2006; October 1, 2007; January 1, 2008; September 11, 2009; October 18, 2010; November 1, 2010; January 1, 2011; February 1, 2012; June 12, 2012; February 21, 2013; April 1, 2013; October 1, 2014; July 1, 2016; and August 1, 2016]

        Subject to the provisions of Article XII, dues and assessments of Members shall be as follows:

        (a) Contract Markets.

        Each contract market Member shall pay to NFA an assessment calculated on the basis of $.005 for each round-turn transaction in a commodity futures contract (purchase and sale or sale and purchase) executed on the contract market, except that in any NFA fiscal year, the total of such assessments paid by a contract market Member that had transaction volume of more than 20 percent of aggregate contract market transaction volume during that fiscal year shall not be more than $150,000 and the total of such assessments paid by a contract market Members that had transaction volume of 20 percent or less of aggregate contract market transaction volume during that fiscal year shall not be more than $100,000. A specific contract market's transaction volume shall be the number of commodity futures contracts entered into on the contract market. The aggregate contract market transaction volume shall be the number of such contracts entered into on all U.S. contract markets. The number of contracts entered into on a contract market shall be adjusted where necessary because of differences in sizes of contracts (e.g., one 5,000 oz. contract for a particular commodity would equal five 1,000 oz. contracts for that commodity for purposes of the computation).

        (b) FCM Members.

          (i) Each FCM Member shall pay to NFA an assessment equal to:

            (A) $.02 for each commodity futures contract traded on or entered into subject to the rules of a contract market (other than an option contract) on a round-turn basis;

            (B) $.01 for each option contract traded on or entered into subject to the rules of a contract market on a per trade basis

          carried by it for a customer other than: (1) a person having privileges of membership on a contract market where such contract is entered (except that this exemption does not apply to transactions by commodity pools operated by NFA Member CPOs); (2) a business affiliate of such FCM that directly or indirectly owns 100 percent of or is owned 100 percent by or has 100 percent ownership in common with such FCM provided such FCM has privileges of membership on the contract market where such contract is entered; or (3) an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM;

            (C) $.02 for each commodity futures contract traded on or entered into subject to the rules of a foreign board of trade (other than an option contract) on a round-turn basis;

            (D) $.01 for each option contract traded on or entered into subject to the rules of a foreign board of trade on a per trade basis

          carried by it for a customer other than: (1) on an omnibus account basis for another FCM Member for which assessments are payable to NFA by the other FCM; or (2) for the proprietary trades of a person who has privileges of membership on any NFA Member contract market that has annual transaction volume of 1,000,000 calculated in conformance with Article VII, Section 2(a)(iii) or Section 2A(a)(iii), as applicable, of NFA's Articles provided, however, that this exemption shall not be afforded for the foreign proprietary trades of a person's parent, affiliate, or subsidiary unless these entities separately meet the requirements of this subsection;

            (E) $.01 for each dealer option contract on a per trade basis carried by it for a customer other than a business affiliate of such FCM that directly or indirectly owns 100 percent of or is owned 100 percent by or has 100 percent ownership in common with such FCM Member:

          Provided, however, such assessments shall be suspended or adjusted by the Board for a period not to exceed three months when in the judgment of the Board such action is appropriate in light of NFA's overall financial goals. The FCM Member shall invoice these assessments to its customer and shall remit the amount due to NFA; and

            (ii) Each FCM for which NFA serves as the DSRO, as defined in NFA Financial Requirements Section 1, shall pay to NFA annual dues of $5,625 and each FCM for which NFA does not serve as the DSRO as defined in NFA Financial Requirements Section 1, shall pay to NFA annual dues of $1,500.

          (c) LTM Members.

            (i) Each LTM Member shall pay to NFA an assessment equal to $.09 for each leverage contract purchased from or sold to the LTM by a customer: Provided, however, such assessments shall be suspended or adjusted by the Board for a period not to exceed three months when in the judgment of the Board such action is appropriate in light of NFA's overall financial goals. The LTM Member shall invoice these assessments to its customers and shall remit the amount due to NFA; and

            (ii) Each LTM Member shall pay to NFA annual dues of $750.

          (d) Other Members.

          Annual dues for the other membership categories shall be as follows:

            (i) Commodity Trading Advisor-$750
            (ii) Commodity Pool Operator-$750
            (iii) Introducing Broker-$750

          Provided, however, that any commodity trading advisor, commodity pool operator, or introducing broker that has been approved as a forex firm pursuant to NFA Bylaw 301(j) shall pay $750 plus an additional surcharge of $1,750.

          (e) Forex Dealer Members.

            (i) Each Forex Dealer Member shall pay to NFA annual dues in the following amounts based on the FDM's gross annual revenue from its latest certified financial statement:

              (a) FDMs with gross annual revenue of $5,000,000 or less shall pay annual dues of $125,000;

              (b) FDMs with gross annual revenue of more than $5,000,000 but not more than $10,000,000 shall pay annual dues of $250,000;

              (c) FDMs with gross annual revenue of more than $10,000,000 but not more than $25,000,000 shall pay annual dues of $500,000;

              (d) FDMs with gross annual revenue of more than $25,000,000 but not more than $50,000,000 shall pay annual dues of $750,000; and

              (e) FDMs with gross annual revenue exceeding $50,000,000 shall pay annual dues of $1,000,000, provided, however, that a Forex Dealer Member for which NFA does not serve as the DSRO, as defined in NFA Financial Requirements Section 1, shall pay annual dues in the amount under section (b)(ii) of this bylaw plus a surcharge of $23,500 if the Forex Dealer Member’s DSRO, or the entity to which the DSRO has delegated such responsibilities, agrees in writing to examine the Forex Dealer Member’s forex activities to ensure compliance with all applicable NFA requirements as part of the annual examination of the Forex Dealer Member. These dues replace the dues that would otherwise be payable based on the Forex Dealer Member's registration category.

            (ii) Each Forex Dealer Member shall pay an assessment of $.004 on each order segment submitted by the Forex Dealer Member to NFA's Forex Transaction Reporting Execution Surveillance System. For purposes of this requirement, an order segment is a record of any line of data associated with an order, and includes when an order is added, modified, cancelled or filled.

          (f) Swap Dealer and Major Swap Participant Members

            (i) Each Swap Dealer Member that meets the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $1,000,000;

            (ii) Each Swap Dealer Member that does not meet the definition of a Large Financial Institution pursuant to Article XVIII of the Articles shall pay to NFA annual dues in the amount of $250,000;

            (iii) Each Major Swap Participant Member shall pay to NFA annual dues in the amount of $150,000; and

            (iv) Any Swap Dealer Member or Major Swap Participant Member that is an affiliate as defined in Article XVIII of the Articles of a Swap Dealer Member that pays annual dues in the amount described in subsections (i) or (ii) above or a Major Swap Participant Member that pays annual dues in the amount described in subsection (iii) above shall pay annual dues in the amount of $150,000.

          These dues apply when a firm first becomes approved as a Swap Dealer Member or Major Swap Participant Member. Thereafter, dues will be assessed on the firm's membership renewal date. Dues will be invoiced and paid quarterly. If an existing Member becomes approved as a Swap Dealer Member or Major Swap Participant Member, then NFA will send the Member an invoice for the dues amount owed minus any membership dues amount already paid during the firm's current membership year.

          Subject to the two-thirds majority voting requirements contained in Article XI, Section 1, the Board may in its discretion waive or establish lower annual dues for particular Members.


          BYLAW 1302. PAYMENT OF DUES AND ASSESSMENTS.

          [Effective dates of amendments: April 11, 1983; July 27, 1983; November 29, 1983; December 30, 1986; January 1, 1990; July 1, 1991; October 1, 2007; July 1, 2010; and February 1, 2012.]

          Unless otherwise provided, annual dues and fees shall be payable in advance on the first day of January of each year, or at such other time or times as the Board shall determine. Members paying dues or fees after the date they are payable shall be subject to a late payment charge of $25 per month or portion thereof. Assessments based upon futures transactions or forex order segments (as defined in Bylaw 1301) shall be payable to NFA within 30 days after the end of each month for transactions effected or order segments submitted during that month. In addition to such assessments each FCM, Forex Dealer Member, and LTM shall pay to NFA an amount equal to one month's interest at an annual rate of 10 percent (or such other rate of interest as the President, with the concurrence of the Executive Committee, may determine from time to time) on the amount of any such assessment payable by that Member for every month or fraction thereof such assessment payment is late. If a Member claims overpayment of its assessments based upon futures or forex transactions, the Member may request a refund in writing with supporting documentation at any time prior to the end of the 6th calendar month following the due date for payment of assessments for the month with respect to which such claimed overpayment was made. After that time, no refunds, adjustments or offsets will be made or allowed. Except as the Board may otherwise provide by resolution, each Member shall pay dues and assessments, as applicable, for each category in which the Member — or an affiliate thereof, unless such affiliate is a Member in its own right—is registered with the Commission and conducts business.


          BYLAW 1303. DEFAULT AND DEEMED REQUEST TO WITHDRAW MEMBERSHIP.

          [Effective dates of amendments: June 4, 1985; January 1, 1990; January 1, 2001; March 18, 2003 and October 1, 2007.]

          When any Member shall be in default in the payment of dues or annual fees for a period of 30 days or assessments or audit fees for a period of three months after such dues, annual fees, assessments or audit fees became payable, NFA shall deem that Member's non-payment of dues, annual fees, assessments or audit fees to be a request to withdraw from NFA membership and shall notify that Member accordingly. NFA may provide the notice required by this Bylaw electronically.


          BYLAW 1304. AUDIT FEES FOR LTMS.

          [Adopted effective January 1, 1990. Effective date of amendments: August 1, 2016.]

          Each LTM Member shall pay an audit fee to NFA each year within 30 days of the date the invoice is mailed by NFA. The Board shall determine the audit fee each year based on the anticipated cost of such audits. If the fee paid is less than the actual cost of auditing the LTM during the calendar year for which it was paid, NFA will invoice the LTM for the difference, and the LTM Member shall pay the invoiced amount within 30 days. If the fee paid is greater than the actual costs of auditing the LTM, the excess will be applied to the fee of the following year. In addition to such audit fee, each LTM shall pay to NFA an amount equal to one month's interest at an annual rate of 10 percent (or such other rate of interest as the President, with the concurrence of the Executive Committee, may determine from time to time) on the amount of any such audit fee payable by that LTM for every month or fraction thereof such audit payment is late.


          Chapter 14. Indemnification and Lawsuits Against NFA

          BYLAW 1401. INDEMNIFICATION.

          NFA shall, to the fullest extent permitted by law, indemnify any person who is, or is threatened to be, made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a Director, officer, employee or agent of NFA, or member of a committee of NFA, or is or was serving at NFA's request as a Director, officer, employee, agent or committee member of another entity, against all reasonable expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement, actually incurred by the person in connection with such action, suit or proceeding.


          BYLAW 1402. LAWSUITS AGAINST NFA.

          [Effective date of amendment: November 12, 2004.]

          Any current or former Member or Associate who fails to prevail in a lawsuit or any other type of legal proceeding instituted in a court of law or otherwise against NFA or any of its officers, directors, committee members, volunteers, arbitrators, employees or agents shall pay to NFA any and all reasonable expenses and disbursements, including reasonable attorney's fees, incurred by NFA to defend such lawsuit or proceeding.


          Chapter 15. Miscellaneous Provisions

          BYLAW 1501. CORPORATE SEAL.

          [Effective dates of amendments: August 21, 2001.]

          The corporate seal of NFA shall be circular in form bearing the name of the corporation and the word "DELAWARE" in the marginal circle, and the words "Corporate Seal" in the inner circle. This seal may be used by causing it, or a facsimile or equivalent thereof, to be impressed, affixed or reproduced.


          BYLAW 1502. DEPOSITORIES.

          All NFA moneys and equivalents not otherwise employed shall be deposited from time to time to the credit of NFA in such financial institutions as may be designated by the Board.


          BYLAW 1503. CHECKS, DRAFTS, NOTES, ETC.

          All checks, drafts or other orders for the payment of money, and all notes or other evidences of indebtedness issued in the name of NFA, shall be signed by such person or persons and in such manner as the Board shall determine from time to time by resolution.


          BYLAW 1504. FISCAL YEAR.

          The fiscal year of NFA shall begin on the first day of July and end on the last day of June in each year.


          BYLAW 1505. EFFECTIVE DATES.

          The Board shall determine the effective dates for the Code of Arbitration, Compliance Rules and Financial Requirements.


          BYLAW 1506. AMENDMENTS TO BYLAWS.

          [Effective dates of amendments: April 11, 1983; January 1, 1990; August 16, 1993; October 15, 2001 and August 1, 2016.]

          No Bylaw may be adopted, amended or repealed by the Board except as specified in a notice sent to each Director either in writing or by electronic transmission at least two weeks prior to the meeting at which the Board considers the same: Provided, however, that such prior notice is not required in an emergency as defined by Bylaw 507, or where a two-thirds majority of all Directors present and voting approves.


          BYLAW 1507. DEFINITIONS.

          [Effective dates of amendments: February 1, 1988; January 1, 1990; February 13, 2007; June 13, 2016; August 1, 2016; and September 19, 2016.]

          Except as provided in this Bylaw, the terms used in these Bylaws shall have the same meaning as in the Articles.

          (a) The term "futures" as used in these Bylaws shall include:

            (i) option contracts granted by a person that has registered with the Commission under Section 4c(d) of the Act as a grantor of such option contracts or has notified the Commission under the Commission's rules that it is qualified to grant such option contracts;

            (ii) foreign futures and foreign options transactions made or to be made on or subject to the rules of a foreign board of trade for or on behalf of foreign futures and foreign options customers as those terms are defined in the Commission's rules;

            (iii) leverage transactions as that term is defined in the Commission's rules; and

            (iv) security futures products, as that term is defined in Section 1a(45) of the Act.

          (b) The term "forex" as used in these Bylaws means foreign currency futures and options and any other agreement, contract, or transaction in foreign currency that is:

            (i) offered or entered into on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis;

            (ii) offered to or entered into with persons that are not eligible contract participants as defined in Section 1a(18) of the Act; and

            (iii) not executed on or subject to the rules of a contract market, a derivatives transaction execution facility, a national securities exchange registered pursuant to Section 6(a) of the Securities Exchange Act of 1934, or a foreign board of trade.

          Provided, however, that the term does not include any security that is not a security futures product, any contract of sale that results in actual delivery within two days, or any contract of sale that creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business, unless the transaction involves a futures contract or an option.

          Such contracts are hereby declared to be proper subjects of NFA regulation and oversight (See Article XVIII).


          BYLAW 1508. SECURITY FUTURES AGREEMENTS.

          [Effective dates of amendments: September 17, 2004 and August 1, 2016.]

          NFA staff may, with the approval of the Executive Committee, enter into one or more agreements with one or more designated contract markets to provide regulatory services to NFA to assist NFA in discharging its obligations under Sections 15A(k) and 19(g) of the Securities Exchange Act of 1934. Any action taken by a designated contract market, or its employees or authorized agents, acting on behalf of NFA pursuant to a regulatory services agreement shall be deemed to be an action taken by NFA; provided, however, that nothing in this provision shall affect the oversight of the designated contract market by the Commission. Notwithstanding the fact that NFA may enter into one or more regulatory services agreements regarding security futures, NFA shall retain ultimate legal responsibility for, and control of, its self-regulatory responsibilities under the Securities Exchange Act of 1934, and any such regulatory services agreement shall so provide.


          Compliance Rules


          Part 1 - Definitions

          RULE 1-1. DEFINITIONS.

          [Effective date of amendments: April 7, 1982; July 27, 1983; January 14, 1988; September 29, 1989; July 24, 2000; August 21, 2001; May 1, 2004; February 13, 2007; October 18, 2010; and September 19, 2016.]

          (a) "Act" — means the Commodity Exchange Act.

          (b) "Actual Funds" — means the equity in a commodity trading account over which a CTA has trading authority and funds that can be transferred to that account without the client's consent to each transfer.

          (c) "Appeals Committee" — means the Appeals Committee established under NFA Bylaw 702.

          (d) "Associate" — means a person who is associated with a Member within the meaning of the term "associated person" as used in the Act and Commission Rules and who is required to be registered as an "associated person" with the Commission

          (e) "Business Conduct Committee" — means the Business Conduct Committee established under NFA Bylaw 704.

          (f) "Commission" or "CFTC" — means the Commodity Futures Trading Commission.

          (g) "Commodity Pool Operator" or "CPO" — means a person who is required to register or is registered as a commodity pool operator under the Act and Commission Rules.

          (h) "Commodity Trading Advisor" or "CTA" — means a person who is required to register or is registered as a commodity trading advisor under the Act and Commission Rules.

          (i) "Contract Market" — means an exchange designated by the Commission as a contract market in one or more commodities or licensed by the Commission for the trading of options.

          (j) "Exchange Act" — means the Securities Exchange Act of 1934.

          (k) "Foreign Board of Trade" — means a board of trade, exchange, or market located outside the United States, its territories or possessions.

          (l) "Foreign Futures" and "Foreign Options" — means futures and options transactions made or to be made on or subject to the rules of a foreign board of trade.

          (m) "Foreign Futures or Foreign Options Customer" — means any person located in the United States, its territories or possessions who trades in foreign futures or foreign options.

          (n) "Forex" — has the same meaning as in Bylaw 1507(b).

          (o) "Forex Dealer Member" — has the same meaning as in Bylaw 306.

          (p) "Futures" includes -

            (1) futures and option contracts traded on a contract market;

            (2) option contracts granted by a person that has registered with the Commission under Section 4c(d) of the Act as a grantor of such option contracts or has notified the Commission under the Commission's rules that it is qualified to grant such option contracts;

            (3) foreign futures and foreign options made or to be made on or subject to the rules of a foreign board of trade for or on behalf of foreign futures or foreign options customers as those terms are defined in the Commission's rules;

            (4) leverage transactions as that term is defined in the Commission's rules; and

            (5) security futures products, as that term is defined in Section 1a(45) of the Act.

          (q) "Futures Commission Merchant" or "FCM" — means a person who is required to register or is registered as a futures commission merchant under the Act and Commission Rules.

          (r) "Hearing Committee" — means the Hearing Committee established under NFA Bylaw 707.

          (s) "Introducing Broker" or "IB" — means a person who is required to register or is registered as an introducing broker under the Act and Commission Rules.

          (t) "Leverage Transaction Merchant" or "LTM" — means a person who is required to register or is registered as a leverage transaction merchant under the Act and Commission Rules.

          (u) "Member" — means a Member of NFA other than a contract market.

          (v) "Nominal Account Size" — means the account size agreed to by the client that establishes the level of trading in the particular trading program.

          (w) "Partially-Funded Account" — has the same meaning as in CFTC Regulation 4.10(m).

          (x) "Person" — includes individuals, corporations, limited liability companies, partnerships, trusts, associations and other entities.

          (y) "Qualified Eligible Person" or "QEP" — has the same meaning as in CFTC Regulation 4.7(a).

          (z) "Requirements" — includes any duty, restriction, procedure or standard imposed by a charter, bylaw, rule, regulation, resolution or similar provision.

          (aa) “Retail Foreign Exchange Dealer” or “RFED” — means a retail foreign exchange dealer as that term is used in the Commodity Exchange Act, and that is required to be registered as such under the Act and Commission Rules.

          (bb) "Security Futures Products" — has the same meaning as in Section 1a(45) of the Act.


          Part 2 - Rules Governing the Business Conduct of Members Registered with the Commission

          RULE 2-1. CONTRACT MARKET JURISDICTION.

          No Member or Associate shall be charged with an offense under these Rules if the specific conduct alleged to constitute the offense is governed or otherwise regulated by the requirements of a contract market and such Member or Associate is subject to the disciplinary jurisdiction of the contract market for such conduct. The foregoing shall not apply if the contract market has expressly delegated enforcement responsibility to NFA, or if the offense under these Rules is a violation of NFA Financial Standards requirements adopted pursuant to Section 1(b) of Article III or NFA Customer Protection requirements adopted pursuant to Section 1(e) of Article III of the NFA Articles of Incorporation.


          RULE 2-2. FRAUD AND RELATED MATTERS.

          [Effective date of amendments: March 21, 1983 and July 24, 2000.]

          No Member or Associate shall:

            (a) Cheat, defraud or deceive, or attempt to cheat, defraud or deceive, any commodity futures customer;

            (b) Bucket a customer's commodity futures order or engage in a business that is of the nature of a bucket shop;

            (c) Willfully make or cause to be made to a customer a false report, or willfully to enter or cause to be entered for a customer a false record, in or in connection with any commodity futures contract;

            (d) Disseminate, or cause to be disseminated, false or misleading information, or a knowingly inaccurate report, that affects or tends to affect the price of any commodity that is the subject of a commodity futures contract;

            (e) Engage in manipulative acts or practices regarding the price of a commodity futures contract;

            (f) Willfully submit materially false or misleading information to NFA or its agents;

            (g) Effect a commodity trade on a contract market for a person who is subject to a Commission prohibition from trading on any contract market, unless the Member or Associate did not know or have reason to know of the prohibition; or

            (h) Embezzle, steal, purloin or knowingly convert any money, securities or other property received from or accruing to a customer, client or pool participant in or in connection with commodity futures contracts.

            (i) Act in any capacity requiring registration under the Act unless the Member or Associate is either registered in that capacity or exempt from registration.


          RULE 2-3. SHARING IN PROFITS.

          No Member or Associate shall share, directly or indirectly, in the profits or losses accruing from commodity futures trading in any account of a customer carried by the Member, or another Member, unless the customer's prior written authorization therefor is obtained.


          RULE 2-4. JUST AND EQUITABLE PRINCIPLES OF TRADE.

          [Effective date of amendments: January 5, 2015.]

          Members and Associates shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business and swaps business.


          RULE 2-5. COOPERATION IN NFA INVESTIGATIONS AND PROCEEDINGS.

          [Effective date of amendments: July 24, 2000.]

          Each Member and Associate shall cooperate promptly and fully with NFA in any NFA investigation, inquiry, audit, examination or proceeding regarding compliance with NFA requirements or any NFA disciplinary or arbitration proceeding. Each Member and Associate shall comply with any order issued by the Executive Committee, the Membership Committee, the Business Conduct Committee, the Appeals Committee or any NFA hearing or arbitration panel.


          RULE 2-6. EXPELLED OR SUSPENDED MEMBER OR ASSOCIATE.

          [Effective date of amendments: July 20, 2005; and June 5, 2007.]

          No person who has been expelled or suspended or is subject to a similar sanction by NFA in a proceeding brought pursuant to Part 3 of NFA's Compliance Rules that temporarily or permanently prohibits the person from NFA membership or affiliation in any capacity with an NFA Member shall hold himself out as a Member in good standing of NFA, or as affiliated with a Member, as the case may be, during the period during which the sanction is in effect. No Member or Associate shall conduct commodity futures or forex business with such a person during the period the sanction is in effect unless authorized by the Business Conduct Committee, Hearing Committee or the Appeals Committee.


          RULE 2-7. BRANCH OFFICE MANAGERS AND DESIGNATED SECURITY FUTURES PRINCIPALS.

          [Adopted effective September 30, 1992. Effective date of amendments: January 28, 1994; August 21, 2001; December 9, 2005; December 17, 2007; and July 9, 2013.]

          (a) No Member shall allow an Associate to be a branch office manager unless:

            (1) The Associate has taken and passed the " Provided, however, that any Associate who subsequently ceases acting as a branch manager will not be required to retake and pass the examination in order to resume acting as a branch manager unless after acting as a branch manager the Associate was not registered in any capacity for a period of more than two years; or

            (2) The Associate is sponsored by a registered broker-dealer and is qualified to act as a branch office manager under the rules of either the New York Stock Exchange or the Financial Industry Regulatory Authority.

              (b) Each Member registered as a broker-dealer under Section 15(b)(11) of the Exchange Act must have at least one designated security futures principal. No such Member shall designate a person as a security futures principal unless:

                (1) The person is a partner, officer, director, branch office manager or supervisory employee of the Member;

                (2) The person is a Member or an Associate of the Member as defined in Bylaw 301(b); and

                (3) The person has taken and passed the "NFA Branch Manager Examination."


            RULE 2-8. DISCRETIONARY ACCOUNTS.

            [Effective date of amendments: July 28, 1983; January 24, 1985; January 14, 1988; March 15, 1994; August 29, 1996; April 23, 1998; July 24, 2000 and August 21, 2001.]

            (a) Grant of Discretion Must Be in Writing.

            No Member or Associate shall exercise discretion over a customer's commodity futures account unless the customer or account controller has authorized the Member or Associate, in writing (by power of attorney or other instrument) to exercise such discretion. No Member or Associate shall exercise discretion with regard to foreign futures or foreign options transactions on behalf of a foreign futures or foreign options customer unless the customer or account controller has specifically authorized the Member or Associate, in writing, to exercise discretion with regard to foreign futures or foreign options transactions. The Member or Associate does not need written authorization to exercise discretion with regard to time and price only. Each Member must maintain records which clearly identify which of the Member's accounts are accounts over which the Member or any Associate thereof has discretionary authority.

            (b) Review of Discretionary Trades.

            Each futures trade initiated in an account that a Member or Associate has written authorization to trade shall be presumed to have been made pursuant to that trading authorization unless otherwise indicated, in writing, at the time the trade was placed. Each Member initiating such trades (other than a Member who employs only one individual having discretionary authority if that individual is also the only principal who supervises futures activity) must adopt and enforce written procedures:

              (1) Which ensure that a partner, officer, director, branch office manager or supervisory employee of the Member (other than any individual who exercises discretion in trading the account) regularly reviews discretionary trading activity and that a designated security futures principal regularly reviews discretionary security futures trading activity if the Member is registered as a broker-dealer under Section 15(b)(11) of the Exchange Act; and

              (2) Which require such partner, officer, director, branch office manager or supervisory employee or designated security futures principal to make a written record that such review procedures were performed.

            Discretionary trading activity must be regularly reviewed, and a written record of the review must be made, as required above.

            (c) Minimum Experience Requirement.

            No Member FCM or IB shall allow an Associate to exercise discretion over a customer's commodity futures account unless that Associate has been continuously registered under the Act for a minimum of two years and has worked in such registered capacity for that period of time. This requirement shall not apply to any individual registered as a CTA. This requirement may, in NFA's discretion, be waived upon a showing that the Associate has equivalent experience. Any Member seeking such a waiver may submit a written request to the Compliance Director and all such requests shall be ruled upon by a three-member panel consisting of three members of the Business Conduct Committee and/or the Hearing Committee, said members to be appointed by the Board from time to time. The decision of the panel shall be final and shall be based upon the written submissions and the views of the Compliance Director. The panel shall communicate its decision to the Compliance Director or a person designated by the Compliance Director, who shall then inform the Member seeking the waiver. An Associate who has been determined to have equivalent experience pursuant to the rules of any contract market Member of NFA having a similar minimum experience requirement shall be deemed to have satisfied the requirement of this Rule.

            (d) Third-Party Account Controllers.

            No FCM or IB shall accept an order from a third party, not an Associate of the FCM or IB, without first obtaining a copy of the account controller's written trading authorization or a written acknowledgment from the customer that such authorization has been given.

            (e) Exception.

            The provisions of sections (b), (c) and (d) of this Rule shall not apply when the individual who owns the account and the individual exercising discretion are members of the same family (a spouse, parent, child, grandparent, grandchild, brother, sister, aunt, uncle, nephew, niece or in-law).


            RULE 2-9. SUPERVISION.

            [Effective date of amendments: October 29, 1991; January 19, 1993; March 15, 1994; April 23, 2002; and November 1, 2007.]

            (a) Each Member shall diligently supervise its employees and agents in the conduct of their commodity futures activities for or on behalf of the Member. Each Associate who has supervisory duties shall diligently exercise such duties in the conduct of that Associate's commodity futures activities on behalf of the Member.

            (b) NFA's Board of Directors may require Members which meet specific criteria established by the Board relating to the employment history of its APs or principals or to the total commissions, fees and other charges paid by their customers to adopt supervisory procedures specified by the Board for the supervision of telemarketing. This requirement may, in NFA's discretion, be waived upon a showing by the Member that the Member's current supervisory procedures provide effective supervision over its employees and agents. Any Member seeking such a waiver may submit a written request to a three-member panel consisting of three members of the Business Conduct Committee and/or the Hearing Committee, said members to be appointed by the Board from time to time. Within 30 days after a Member submits a waiver request, the Compliance Director will submit a written response to the panel. The decision of the panel shall be final and shall be based upon the written submissions of the Member and of the Compliance Director.

            (c) Each FCM and IB Member shall develop and implement a written anti-money laundering program approved in writing by senior management reasonably designed to achieve and monitor the Member's compliance with the applicable requirements of the Bank Secrecy Act (31 U.S.C. 5311, et. seq.), and the implementing regulations promulgated thereunder by the Department of the Treasury and, as applicable, the Commodity Futures Trading Commission. That anti-money laundering program shall, at a minimum,

              (1) Establish and implement policies, procedures, and internal controls reasonably designed to assure compliance with the applicable provisions of the Bank Secrecy Act and the implementing regulations thereunder;

              (2) Provide for independent testing for compliance to be conducted by Member personnel or by a qualified outside party;

              (3) Designate an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the program; and

              (4) Provide ongoing training for appropriate personnel.


            RULE 2-10. RECORDKEEPING.

            [Effective date of amendments: April 11, 1983; April 1, 2006; July 1, 2007; October 1, 2011; and June 17, 2013.]

            (a) Each Member shall maintain adequate books and records necessary and appropriate to conduct its business including, without limitation, the records required to be kept under CFTC Regulations 1.18, 1.32 through 1.37, 1.68, and 1.71 for the period required under CFTC Regulation 1.31.

            (b) Each FCM Member and Forex Dealer Member must:

              (1) Maintain an office in the continental United States, Alaska, Hawaii, or Puerto Rico responsible for preparing and maintaining financial and other records and reports required by CFTC and/or NFA rules under the supervision of a listed principal and registered associated person of the FCM or Forex Dealer Member who is resident in that office; or

              (2) If an FCM, maintains an office in a jurisdiction that the CFTC has found to have a comparable regulatory scheme for purposes of Part 30 of the CFTC's rules and be subject to that regulatory scheme. This foreign office must be responsible for preparing and maintaining financial and other records and reports required by CFTC and/or NFA rules under the supervision of a listed principal and registered associated person of the FCM who is resident in that office, and the Member must agree to reimburse NFA for any travel, translation, telephone, and similar expenses incurred in connection with inquiries, examinations and investigations of the Member that exceed the normal expenses incurred by NFA in examining an FCM Member located at the closest point in the continental United States, Alaska, Hawaii, or Puerto Rico.

            (c) Each Member subject to minimum capital requirements must:

              (1) prepare financial reports required to be filed with the CFTC and/or NFA in English, using U.S. dollars, and according to U.S. accounting standards; and

              (2) maintain a general ledger in English using U.S. dollars.

            (d) Each Member must:

              (1) file reports, requests for extensions, and other documents required to be filed with the CFTC and/or NFA in English;

              (2) maintain English translations of all foreign-language promotional material, including disclosure documents and Web sites, distributed to or intended for viewing by customers located in the United States, its territories, or possessions;

              (3) maintain written procedures required by CFTC or NFA rules in English (as well as in any other language if necessary for them to be understood by the Member's employees and agents);

              (4) provide English translations of other foreign-language documents and records and file financial information in U.S. dollars when requested by NFA; and

              (5) make available to NFA (during an examination or to respond to other inquiries) an individual who is authorized to act on the Member's behalf, is fluent in English, and is knowledgeable about the Member's business and about financial matters.


            RULE 2-11. CUSTOMER ACCOUNTS.

            [Adopted effective September 30, 1982. Effective date of amendments: July 24, 2000.]

            No Member FCM, unless a member of a contract market, shall carry customer accounts without prior notice to NFA.


            RULE 2-12. [RESERVED].


            RULE 2-13. CPO/CTA REGULATIONS.

            [Adopted effective September 29, 1982. Effective date of Amendments: April 11, 1983; July 5, 1984; April 4, 1988; August 24, 1995; October 10, 1996; July 24, 2000; December 14, 2003; and October 18, 2010.]

            (a) Any Member who violates any of CFTC Regulations 4.1, 4.7, 4.12 and 4.16 through 4.41 shall be deemed to have violated an NFA requirement. Members are also subject to the requirements of CFTC Regulation 5.4.

            (b) Each Member CPO which delivers or causes to be delivered a Disclosure Document under CFTC Regulation 4.21 must include in the Disclosure Document a break-even analysis which includes a tabular presentation of fees and expenses. The break-even analysis must be presented in the manner prescribed by NFA's Board of Directors and must be accurate as of the date of the Disclosure Document.

            (c) Each Member required to file any document with or give notice to the CFTC under CFTC Regulations 4.7, 4.12, 4.22, 4.26 or 4.36 shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC. Any CPO Member may file with NFA a request for an extension of time in which to file the annual report required by CFTC Regulation 4.22(c) or a request for approval of a change to its fiscal-year election.


            RULE 2-14. COMPLIANCE JURISDICTION.

            [Effective date of amendments: September 29, 1982 and July 24, 2000.]

            Any Member or Associate who violates or fails to comply with any NFA requirement shall be subject to appropriate Member or Associate Responsibility Action or disciplinary action, or both, in accordance with these rules.


            RULE 2-15. [RESERVED]


            RULE 2-16. [RESERVED]


            RULE 2-17. [RESERVED]


            RULE 2-18. [RESERVED]


            RULE 2-19. [RESERVED]


            RULE 2-20. [RESERVED]


            RULE 2-21. [RESERVED]


            RULE 2-22. PROHIBITED REPRESENTATIONS.

            [Adopted effective April 22, 1983. Effective date of amendments: August 1, 1985 and August 21, 2001]

            No Member or Associate shall represent or imply in any manner whatsoever that such Member or Associate has been sponsored, recommended or approved, or that such Member's or Associate's abilities have in any respect been passed upon, by NFA or any federal or state regulatory body: Provided, however, that this Rule shall not prohibit a Member from stating the fact of membership, or an Associate from stating the fact of registration as an Associate if the effect of NFA membership or registration as an Associate is not misrepresented, or from discussing or explaining the functions and purposes of NFA.


            RULE 2-23. FCM AND RFED RESPONSIBILITY FOR GUARANTEED MEMBER IBs.

            [Adopted effective February 27, 1984. Effective date of Amendments: October 18, 2010]

            Any Member FCM or RFED which enters into a guarantee agreement, pursuant to CFTC Regulation 1.10(j), with a Member IB, shall be jointly and severally subject to discipline under NFA Compliance Rules for acts and omissions of the Member IB which violate NFA requirements occurring during the term of the guarantee agreement.


            RULE 2-24. QUALIFICATION TESTING OF ASSOCIATED PERSONS.

            [Adopted effective May 4, 1984. Effective date of Amendments: January 1, 1990; September 9, 2002; and October 18, 2010.]

            (a) Testing Requirement.

            Subject to the provisions of paragraphs (d) and (e) of Bylaw 301, no FCM, RFED, IB, CPO, CTA or LTM Member of NFA shall have associated with it (See Bylaw 301(b)) any person who has not satisfied the applicable proficiency requirements set forth in Registration Rule 401.

            (b) Limitations on Activities.

              (i) No person registered with NFA as an Associate of an NFA Member (See Bylaw 301(b)) who has satisfied the requirements of Registration Rule 401 by the use of an alternative to the National Commodity Futures Examination (Series 3) that requires the person to limit their futures-related activities may exceed such limits.

              (ii) No Member of NFA shall have associated with it (See Bylaw 301(b)) any person who has satisfied the requirements of Registration Rule 401 by the use of an alternative to the National Commodity Futures Examination (Series 3) that requires the person to limit their futures-related activities and who exceeds such limits.


            RULE 2-25. REQUIREMENTS FOR DEALER OPTIONS TRANSACTIONS OF FCMs.

            [Adopted effective November 5, 1984]

            Any Member who violates any of the CFTC Part 32 Regulations shall be deemed to have violated an NFA requirement. Each Member required to file any documents with or give notice to the CFTC under the CFTC Part 32 Regulations shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC.


            RULE 2-26. FCM AND IB REGULATIONS.

            [Adopted effective January 24, 1985. Effective date of Amendments: February 1, 1996; August 29, 1996; July 24, 2000; August 21, 2001; and July 12, 2014.]

            Any Member or Associate who violates any of CFTC Regulations 1.11, 1.33, 1.55, 1.56, 1.57, 1.65, 155.3, or 155.4, as applicable, shall be deemed to have violated an NFA Requirement.


            RULE 2-27. TRANSFER OF CUSTOMER ACCOUNTS.

            [Adopted effective January 24, 1985.]

            (a) Upon receipt of a signed instruction from a customer to transfer an account from one Member to another, and provided that such instruction contains the customer's name, address and account number (and, if the transfer is not of the entire account, a description of which portions are to be transferred) and the name and address of the receiving Member, the carrying Member shall confirm to the receiving Member all balances in the account, whether money, securities or other property, and all open positions, within two business days or within such further time as may be necessary in the exercise of due diligence. Within three business days of the day such confirmation is due, or within such further time as may be necessary in the exercise of due diligence, and provided that the receiving Member agrees to accept the account, the carrying Member shall effect the transfer of the balances and positions to the receiving Member.

            (b) This rule shall apply only to transfers made at the request of a customer.

            (c) This rule shall not prohibit transfers based upon oral requests.


            RULE 2-28. [RESERVED]


            RULE 2-29. COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL.

            [Adopted effective November 19, 1985. Effective date of Amendments: February 1, 1996; August 29, 1996; March 28, 2000; July 24, 2000; December 4, 2000; August 21, 2001; May 1, 2004; and February 1, 2010.]

            (a) General Prohibition.

            No Member or Associate shall make any communication with the public which:

              (1) operates as a fraud or deceit;
              (2) employs or is part of a high-pressure approach; or
              (3) makes any statement that futures trading is appropriate for all persons.

            (b) Content of Promotional Material.

            No Member or Associate shall use any promotional material which:

              (1) is likely to deceive the public;

              (2) contains any material misstatement of fact or which the Member or Associate knows omits a fact if the omission makes the promotional material misleading;

              (3) mentions the possibility of profit unless accompanied by an equally prominent statement of the risk of loss;

              (4) includes any reference to actual past trading profits without mentioning that past results are not necessarily indicative of future results;

              (5) includes any specific numerical or statistical information about the past performance of any actual accounts (including rate of return)

                (i) unless such information is and can be demonstrated to NFA to be representative of the actual performance for the same time period of all reasonably comparable accounts and,

                (ii) in the case of rate of return figures, unless such figures are calculated in a manner consistent with CFTC Regulation 4.25(a)(7) for commodity pools and with CFTC Regulation 4.35(a)(6), as modified by NFA Compliance Rule 2-34(a), for figures based on separate accounts, or

              (6) includes a testimonial that is not representative of all reasonably comparable accounts, does not prominently state that the testimonial is not indicative of future performance or success, and does not prominently state that it is a paid testimonial (if applicable).

            (c) Hypothetical Results.

              (1) Any Member or Associate who uses promotional material which includes a measurement or description of or makes any reference to hypothetical performance results which could have been achieved had a particular trading system of the Member or Associate been employed in the past must include in the promotional material the following disclaimer prescribed by NFA's Board of Directors:

                HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

                ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

              If a Member or Associate has either less than one year of experience in directing customer accounts or trading proprietary accounts, then the disclaimer must also contain the following statement:

                (THE MEMBER) HAS HAD LITTLE OR NO EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CUSTOMERS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE HYPOTHETICAL PERFORMANCE RESULTS, CUSTOMERS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE HYPOTHETICAL PERFORMANCE RESULTS.

              (2) Any Member or Associate who uses promotional material which includes a measurement or description of or makes any reference to a hypothetical composite performance record showing what a multi-advisor account portfolio or pool could have achieved in the past if assets had been allocated among particular trading advisors must include in the promotional material the following disclaimer prescribed by NFA's Board of Directors instead of the disclaimer prescribed by Section (c) (1) of this Rule:

                THIS COMPOSITE PERFORMANCE RECORD IS HYPOTHETICAL AND THESE TRADING ADVISORS HAVE NOT TRADED TOGETHER IN THE MANNER SHOWN IN THE COMPOSITE. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY MULTI-ADVISOR MANAGED ACCOUNT OR POOL WILL OR IS LIKELY TO ACHIEVE A COMPOSITE PERFORMANCE RECORD SIMILAR TO THAT SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED.

                ONE OF THE LIMITATIONS OF A HYPOTHETICAL COMPOSITE PERFORMANCE RECORD IS THAT DECISIONS RELATING TO THE SELECTION OF TRADING ADVISORS AND THE ALLOCATION OF ASSETS AMONG THOSE TRADING ADVISORS WERE MADE WITH THE BENEFIT OF HINDSIGHT BASED UPON THE HISTORICAL RATES OF RETURN OF THE SELECTED TRADING ADVISORS. THEREFORE, COMPOSITE PERFORMANCE RECORDS INVARIABLY SHOW POSITIVE RATES OF RETURN. ANOTHER INHERENT LIMITATION ON THESE RESULTS IS THAT THE ALLOCATION DECISIONS REFLECTED IN THE PERFORMANCE RECORD WERE NOT MADE UNDER ACTUAL MARKET CONDITIONS AND, THEREFORE, CANNOT COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FURTHERMORE, THE COMPOSITE PERFORMANCE RECORD MAY BE DISTORTED BECAUSE THE ALLOCATION OF ASSETS CHANGES FROM TIME TO TIME AND THESE ADJUSTMENTS ARE NOT REFLECTED IN THE COMPOSITE.

              If a Member or Associate has less than one year of experience allocating assets among particular trading advisors, then the disclaimer must also contain the following statement:

                (THE MEMBER) HAS HAD LITTLE OR NO EXPERIENCE ALLOCATING ASSETS AMONG PARTICULAR TRADING ADVISORS. BECAUSE THERE ARE NO ACTUAL ALLOCATIONS TO COMPARE TO THE PERFORMANCE RESULTS FROM THE HYPOTHETICAL ALLOCATION, CUSTOMERS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE RESULTS.

              (3) Any Member or Associate who uses promotional material which includes a measurement or description of or makes any reference to hypothetical performance results which could have been achieved had a particular trading system of the Member or Associate been employed in the past must include in the promotional material comparable information regarding:

                (i) past performance results of all customer accounts directed by the Member pursuant to a power of attorney over at least the last five years or over the entire performance history if less than five years;

                (ii) if the Member has less than one year of experience in directing customer accounts, past performance results of his proprietary trading over at least the last five years or over the entire performance history if less than five years.

              (4) No Member or Associate may use promotional material which includes a measurement or description of or makes any reference to hypothetical performance results which could have been achieved had a particular trading system of the Member or Associate been employed in the past if the Member or Associate has three months of actual trading results for that system.

              (5) Any Member or Associate utilizing promotional material containing hypothetical performance results must adhere to all the requirements contained in the Board's Interpretive Notice relating to this issue.

              (6) These restrictions on the use of hypothetical trading results shall not apply to promotional material directed exclusively to persons who meet the standards of a "Qualified Eligible Person" under CFTC Regulation 4.7.

            (d) Statements of Opinion.

            Statements of opinion included in promotional material must be clearly identifiable as such and must have a reasonable basis in fact.

            (e) Supervisory Requirements

            Every Member shall adopt and enforce written procedures to supervise its Associates and employees for compliance with this Rule. Prior to its first use, all promotional material shall be reviewed and approved, in writing, by an officer, general partner, sole proprietor, branch office manager or other supervisory employee other than the individual who prepared such material (unless such material was prepared by the only individual qualified to review and approve such material). If the Member is registered as a broker-dealer under Section 15(b)(11) of the Exchange Act and the promotional material specifically refers to security futures products, the individual reviewing and approving the promotional material must be a designated security futures principal.

            (f) Recordkeeping.

            Copies of all promotional material along with a record of the review and approval required under paragraph (e) of this Rule and supporting materials for any results described under paragraphs (b)(5)-(6) or (c) of this Rule must be maintained by each Member and be available for examination for the periods specified in CFTC Regulation 1.31, measured from the date of the last use. Each Member who uses promotional material of the types described in paragraph (b)(5)-(6) or (c) of this Rule shall demonstrate the basis for any reported results to NFA upon request.

            (g) Filing with NFA.

            The Compliance Director may require any Member for any specified period to file copies of all promotional material with NFA promptly after its first use.

            (h) Radio and Television Advertisements.

            No Member shall use or directly benefit from any radio or television advertisement or any other audio or video advertisement distributed through media accessible by the public if the advertisement makes any specific trading recommendation or refers to or describes the extent of any profit obtained in the past or that can be achieved in the future unless the Member submits the advertisement to NFA’s Promotional Material Review Team for its review and approval at least 10 days prior to first use or such shorter period as NFA may allow in particular circumstances.

            (i) Definitions.

              (1) For purposes of this Rule "promotional material" includes: (i) Any text of a standardized oral presentation, or any communication for publication in any newspaper, magazine or similar medium, or for broadcast over television, radio, or other electronic medium, which is disseminated or directed to the public concerning a futures account, agreement or transaction; (ii) any standardized form of report, letter, circular, memorandum or publication which is disseminated or directed to the public; and (iii) any other written material disseminated or directed to the public for the purpose of soliciting a futures account, agreement or transaction.

              (2) "Futures account, agreement or transaction" includes futures accounts and orders, commodity pool participations, agreements to direct or guide trading in futures accounts, and agreements and transactions involving the sale, through publications or otherwise, of non-personalized trading advice concerning futures.

            (j) Security Futures Products

            In addition to the other requirements of this Rule, Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates shall not use any promotional material that specifically refers to security futures products unless the promotional material:

              (1) prominently identifies the Member;

              (2) includes the date that the material was first used;

              (3) provides contact information for obtaining a copy of the disclosure statement for security futures products;

              (4) states that security futures products are not suitable for all customers;

              (5) does not include any statement suggesting that security futures positions can be liquidated at any time;

              (6) does not include any cautionary statement, caveat, or disclaimer that is not legible, that attempts to disclaim responsibility for the content of the promotional material or the opinions expressed in the material, that is misleading, or that is otherwise inconsistent with the content of the material;

              (7) discloses the source of any statistical tables, charts, graphs, or other illustrations from a source other than the Member, unless the source of the information is otherwise obvious;

              (8) states that supporting documentation will be furnished upon request if it includes any claims, comparisons, recommendations, statistics or other technical data;

              (9) if soliciting for a trading program that will be managed by an FCM or IB or Associate of an FCM or IB, it includes the cumulative performance history of the Member's customers who have used the trading program; provided, however, that if the Member does not have customers who have traded the program through the Member, the promotional material must state that the trading program is unproven and must include all of the information required by section (c) of this Rule and the Interpretive Notice on the Use of Promotional Material Containing Hypothetical Performance Results (9025);

              (10) refers to past recommendations regarding security futures products, the underlying securities, or a derivative thereof only if it sets forth all recommendations as to the same type, kind, grade, or classification of securities (including security futures products and other security derivatives) made by the Member or Associate within the last year; which information must include the name of each security recommended with the date and nature of each recommendation (e.g., whether to buy or sell), the price at the time of the recommendation, the price at which or the price range within which the recommendation was to be acted upon, and the general market conditions during the period covered if the promotional material refers to past recommendations regarding security futures products, the underlying securities, or a derivative thereof;

              (11) includes current recommendations regarding security futures products only if: (i) the Member has a reasonable basis for the recommendation; (ii) the material discloses all material conflicts of interest created by the Member's or Associate's activities in the underlying security; and (iii) the material contains contact information for obtaining the list of prior recommendations described in subsection (10);

              (12) includes only a general description of the security futures products for which accounts, orders, trading authorization, or pool participations are being solicited; the name of the Member; and contact information for obtaining a copy of the current disclosure statement for security futures products; provided, however, that this subsection does not apply if the promotional material is accompanied or preceded by the disclosure statement for security futures products; and

              (13) has been submitted to NFA for review and approval at least ten days prior to first use if it reaches or is designed to reach a public audience through mass media (e.g., newspapers, magazines, radio, television, or other electronic media). This requirement does not apply to any promotional material in which the only reference to security futures products is contained in a listing of the Member's services.


            RULE 2-30. CUSTOMER INFORMATION AND RISK DISCLOSURE.

            [Adopted effective June 1, 1986. Effective date of amendments: January 1, 1990; August 21, 2001 December 10, 2002; December 17, 2007; January 3, 2011; and September 19, 2016.]

            (a) Each Member or Associate shall, in accordance with the provisions of this Rule, obtain information from all individual customers and any other customers who are not eligible contract participants (as defined in Section 1(a)(18) of the Act) and provide such customers with disclosure of the risks of futures trading.

            (b) The Member or Associate shall exercise due diligence to obtain the information and shall provide the risk disclosure at or before the time a customer first opens a futures trading account to be carried or introduced by the Member, or first authorizes the Member to direct trading in a futures account for the customer. A Member registered as a broker or dealer under Section 15(b)(11) of the Exchange Act shall provide a copy of the disclosure statement for security futures products at or before the time the Member approves the account to trade security futures products. For an active customer who is an individual, the FCM Member carrying the customer account shall contact the customer, at least annually, to verify that the information obtained from that customer under Section (c) of this Rule remains materially accurate, and provide the customer with an opportunity to correct and complete the information. Whenever the customer notifies the FCM Member carrying the customer's account of any material changes to the information, a determination must be made as to whether additional risk disclosure is required to be provided to the customer based on the changed information. If another FCM or IB introduces the customer's account on a fully disclosed basis or a CTA directs trading in the account, then the carrying FCM must notify that Member of the changes to the customer's information. The Member or Associate who currently solicits and communicates with the customer is responsible for determining if additional risk disclosure is required to be provided based on the changed information. In some cases, this may be the Member introducing or controlling the account; in other cases, it may be the carrying FCM.

            (c) The information to be obtained from the customer shall include at least the following:

              (1) The customer's true name and address, and principal occupation or business;

              (2) For customers who are individuals, the customer's current estimated annual income and net worth. For all other customers, the customer's net worth or net assets and current estimated annual income, or where not available, the previous year's annual income;

              (3) For individuals, the customer's approximate age or date of birth;

              (4) An indication of the customer's previous investment and futures trading experience; and

              (5) Such other information deemed appropriate by such Member or Associate to disclose the risks of futures trading to the customer.

            In addition, Members that are not also members of the Financial Industry Regulatory Authority and their Associates must obtain the following information from each customer who is an individual if the customer trades security futures products:

              (6) Whether the customer's account is for speculative or hedging purposes;

              (7) The customer's employment status (e.g., name of employer, self-employed, retired);

              (8) The customer's estimated liquid net worth (cash, securities, other);

              (9) The customer's marital status and number of dependents;

              (10) Such other information used or considered to be reasonable by such Member or Associate in making recommendations to the customer.

            (d) The risk disclosure to be provided to the customer shall include at least the following:

              (1) the Risk Disclosure Statement required by CFTC Regulation 1.55, if the Member is required by that Regulation to provide it;

              (2) the Disclosure Document required by CFTC Regulation 4.31, if the Member is required by that Regulation to provide it;

              (3) the Options Disclosure Statement required by CFTC Regulation 33.7, if the Member is required by that Regulation to provide it; and

              (4) the Disclosure Document required by CFTC Regulation 31.11, if the Member is required by that Regulation to provide it.

            (e) In the case of an account which is introduced by an FCM or IB or for which a CTA directs trading, and except as otherwise provided in subsections (b) and (j), it shall be the responsibility of the Member soliciting the account to comply with this Rule.

            (f) A Member or Associate shall be entitled to rely on the customer [as the sole source] for the information obtained under Section (c) of this Rule and shall not be required to verify such information, except as provided in section (j)(2) of this rule.

            (g) Each Member or Associate shall make or obtain a record containing the information obtained under Section (c) of this Rule at the time the information is obtained. If a customer declines to provide the information set forth in Section (c) of this Rule, the Member or Associate shall make a record that the customer declined, except that such a record need not be made in the case of a non-U.S. customer unless such customer trades security futures products. Subject to the provisions of Section (i) of this Rule, a Member may open, introduce or agree to direct a futures trading account for a customer only upon the approval of a partner, officer, director, branch office manager or supervisory employee of the Member. Each Member shall keep copies of all records made pursuant to this Rule in the form and for the period of time set forth in CFTC Regulation 1.31.

            (h) Each Member shall establish and enforce adequate procedures to review all records made pursuant to this Rule and to supervise the activities of its Associates in obtaining customer information and providing risk disclosure.

            (i) Nothing herein shall relieve any Member from the obligation to comply with all applicable CFTC and SEC Regulations and NFA Requirements.

            (j) Members that are not also members of the Financial Industry Regulatory Authority and their Associates shall adhere to the following additional requirements relating to accounts for customers that trade security futures products:

              (1) A Member shall exercise due diligence to learn the essential facts relative to the customer, including the customer's investment objectives and financial situation and, based upon those facts (including any information obtained under subsection (c) of this Rule, if applicable), a partner, officer, director, branch office manager, or supervisory employee of the Member shall approve or disapprove the customer's account for security futures transactions. If the Member is an FCM or IB, the account must be approved or disapproved by a designated security futures principal. The approval or disapproval shall be in writing and shall identify the person approving or disapproving the account. Additionally, the customer's account records shall contain information about the account, including the name of the Associate, how the customer's information was obtained, and the date that the disclosure statement for security futures products was provided.

              (2) A Member or Associate shall forward the background and financial information upon which the customer's account has been approved for trading security futures products to each customer who is an individual, unless the information has been obtained in writing from the customer, for verification of accuracy within fifteen days after the customer's account has been approved. A copy of the background and financial information on file with the Member shall also be sent to each customer who is an individual for verification within fifteen days after the Member becomes aware of any material change in the customer's financial status. In all cases, absent notice to the contrary from the customer, the information is deemed verified.

              (3) No FCM or IB Member or Associate thereof shall recommend to a non-institutional customer a transaction in security futures products or a particular trading strategy relating to such products without making reasonable efforts to obtain current information regarding the customer's financial status and investment objectives; provided, however, that this requirement does not apply to transactions in discretionary accounts. For purposes of this requirement, a non-institutional customer is any customer who is not:

                (i) a bank, savings and loan association, insurance company, registered investment company, a registered commodity pool operator, or a commodity pool operated by a registered commodity pool operator;

                (ii) an investment advisor registered either with the Securities and Exchange Commission under Section 203 of the Investment Advisers Act of 1940 or with a state securities commission (or any agency or office performing like functions) or a registered commodity trading advisor;

                (iii) an investment company exempt from registration under the Investment Company Act of 1940, a commodity pool operator exempt from registration under the Commodity Exchange Act, a commodity pool operated by a commodity pool operator exempt from registration under the Commodity Exchange Act, an investment advisor exempt from both federal and state registration under the Investment Advisers Act of 1940, or a commodity trading advisor exempt from registration under the Commodity Exchange Act;

                (iv) a registered broker-dealer or futures commission merchant; or

                (v) any other entity (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 million.

              (4) No FCM or IB Member or Associate thereof shall recommend to any customer a transaction in security futures products or a particular trading strategy relating to such products without reasonable grounds for believing that the recommendation or strategy is not unsuitable for the customer on the basis of the customer's current investment objectives, financial situation and needs, and any other information known by the Member or Associate.

              (5) No FCM or IB Member or Associate shall recommend a security futures transaction to a customer unless the person making the recommendation has a reasonable basis for believing, at the time of making the recommendation, that the customer has such knowledge and experience in financial matters that the customer may reasonably be expected to be capable of evaluating the risks of the recommended transaction, and is financially able to bear the risks of the recommended transaction.

              (6) No Member or Associate exercising discretion over an account may effect security futures transactions that are excessive in size or frequency in view of the customer's investment objectives and financial situation.


            RULE 2-31. FOREIGN FUTURES AND FOREIGN OPTIONS TRANSACTIONS.

            [Adopted effective February 1, 1988.]

            Any Member who violates any of the CFTC Part 30 Regulations shall be deemed to have violated an NFA Requirement.


            RULE 2-32. LEVERAGE TRANSACTIONS.

            [Adopted effective January 1, 1990.]

            Any Member or Associate who violates any of the CFTC Part 31 Regulations shall be deemed to have violated an NFA Requirement.


            RULE 2-33. FCM RECEIPT OF FUNDS FROM OMNIBUS ACCOUNTS.

            [Adopted effective July 24, 1990.]

            Each FCM must give notice to its DSRO or, if so directed by its DSRO, to NFA whenever the FCM accepts other than immediately available funds from an FCM doing business on an omnibus basis. Notice must be received within 24 hours of such acceptance. For purposes of this Rule, wire transfers and certified checks shall be considered immediately available funds for which notice is not required.


            RULE 2-34. CTA PERFORMANCE REPORTING AND DISCLOSURES

            [Adopted effective May 1, 2004.]

            (a) Performance Information

              (1) Member CTAs must calculate rate of return according to CFTC Regulation 4.35(a)(6) using nominal account size as the denominator.

              (2) Draw-down information reported under CFTC Regulation 4.35(a)(1)(v) and (vi) must be based on rate of return figures using nominal account size as the denominator.

              (3) In calculating net performance, Member CTAs may include interest earned on actual funds but may not impute interest on other funds.

            (b) Written Confirmation for Partially-Funded Accounts

              (1) For partially-funded accounts, a Member CTA must either receive from a client or deliver to a client a written confirmation that contains the following information:

                (i) the name or description of the trading program, and

                (ii) the nominal account size agreed to by the client and the CTA.

              (2) For new clients, the written confirmation must be received from or delivered to the client before the CTA places the first trade for the client.

              (3) For existing clients, the written confirmation must be received from or delivered to the client before the CTA places the first trade after any of the information required under Section (b)(1) of this rule changes. The written confirmation must include the new information and the effective date of the change but need not include any information that will remain the same.

            (c) Additional Disclosures for Partially-Funded Accounts

            CTAs must provide the following information to clients with partially-funded accounts if the clients are not QEPs:

              (1) A statement of how management fees will be computed relative to the nominal account size,

              (2) An explanation of how cash additions, cash withdrawals, and net performance will affect the nominal account size,

              (3) A brief explanation regarding the effect of partial funding on margin and leverage,

              (4) A statement that partial funding increases the fees and commissions as a percentage of actual funds but does not increase the dollar amount of those fees, and

              (5) A description, by example or formula, of the effect of partial funding on rate of return and drawdown percentages.

            (d) CPO Use of CTA Performance Information

            Member CPOs who are required by CFTC Regulation 4.25(c) to disclose CTA performance must report the CTA performance on the same basis as the CTA is required to report it.


            RULE 2-35. CPO/CTA DISCLOSURE DOCUMENTS.

            [Effective dates of amendments: November 1, 2000 and December 14, 2003.]

            (a) Required Delivery of Pool Disclosure Document and Statement of Additional Information

              (1) The Disclosure Document required by CFTC Regulation 4.21(a) must be as clear and concise as possible, using plain English principles, and must contain only the information required or allowed by subsection (b).

              (2) In addition to the Disclosure Document, the CPO of a commodity pool required to register its securities under the Securities Act of 1933 must deliver (or cause to be delivered) a separate Statement of Additional Information to a prospective participant prior to accepting or receiving funds from the prospective participant. The information that may be included in the Statement of Additional Information is described in subsection (c).

              (3) The CPO of a commodity pool that is not required to register its securities under the Securities Act of 1933 may, but is not required to, prepare and distribute a Statement of Additional Information containing any or all of the information described in subsection (c). The Statement of Additional Information may be bound together with the Disclosure Document as long as the Disclosure Document comes first. If the Statement of Additional Information is separately bound, the CPO is not required to provide it to a prospective participant unless the prospective participant requests it.

              (4) If a Statement of Additional Information is required under paragraph (2) of this section, the cover page of the Disclosure Document required under paragraph (1) of this section and the Statement of Additional Information required under paragraph (2) of this section shall state that the Disclosure Document is in two parts, both of which must be provided to a prospective participant prior to investing in the offered pool. If a Statement of Additional Information is prepared and separately distributed under paragraph (3) of this section, the cover page of the Disclosure Document required under paragraph (1) of this section shall state that the Statement of Additional Information is available free of charge and shall indicate how to obtain a copy of the Statement of Additional Information.

            (b) Disclosures Required in the Disclosure Document

              (1) The Disclosure Document required under subsection (a)(1) of this Rule must include the following:

                (i) The information required by CFTC Regulation 4.24, and the performance disclosures required by CFTC Regulation 4.25, provided, however, that a CPO may provide the performance information required under CFTC Regulation 4.25(c)(5) in the Statement of Additional Information; and

                (ii) Any other information necessary to understand the fundamental characteristics of the pool or keep the Disclosure Document from being misleading.

              (2) The Disclosure Document required under subsection (a)(1) for pools required to register their securities under the Securities Act of 1933 shall include any other information that the Securities and Exchange Commission or state securities administrators require to be included in Part I of a two-part disclosure document. For all other pools, Disclosure Documents required under subsection (a)(1) may include such information.

            (c) Information Included in the Statement of Additional Information

              (1) If the CPO of a commodity pool prepares a Statement of Additional Information, the cover page must include the following:

                (i) The name of the commodity pool;

                (ii) A brief statement that the Statement of Additional Information is the second part of a two-part document and that it should be read in conjunction with the pool's Disclosure Document, with instructions on how to obtain a free copy of the Disclosure Document;

                (iii) The date of the most recent Disclosure Document for the pool; and

                (iv) The date of the Statement of Additional Information.

              (2) The cover page must be immediately followed by a table of contents.

              (3) The Statement of Additional Information may also include:

                (i) Disclosures, not included in the Disclosure Document, that are required by the Securities and Exchange Commission or state securities administrators;

                (ii) Statements that expand on or explain the disclosures in the Disclosure Document, provided that the statements are not misleading or inconsistent with applicable statutes, rules, or regulations; and

                (iii) Any other information about the commodity pool; its investments; its CPO, CTA(s), service providers, and their principals and employees; the commodity futures markets; or any other markets, including cash markets, that affect the value of the pool's investments, provided that the information is not misleading or otherwise inconsistent with applicable statutes, rules, or regulations.


            RULE 2-36. REQUIREMENTS FOR FOREX TRANSACTIONS

            [Adopted effective June 28, 2002. Effective dates of amendments: December 1, 2003; November 30, 2005; February 13, 2007; October 25, 2007; April 1, 2009; October 18, 2010; October 1, 2011; January 4, 2016; March 29, 2017; and March 31, 2017.]

            (a) General Prohibition

            No Forex Dealer Member shall engage in any forex transaction that is prohibited under the Commodity Exchange Act.

            (b) Fraud and Related Matters

            No Forex Dealer Member or Associate of a Forex Dealer Member engaging in any forex transaction shall:

              (1) Cheat, defraud or deceive, or attempt to cheat, defraud or deceive any other person;

              (2) Willfully make or cause to be made a false report, or willfully to enter or cause to be entered a false record in or in connection with any forex transaction;

              (3) Disseminate, or cause to be disseminated, false or misleading information, or a knowingly inaccurate report, that affects or tends to affect the price of any foreign currency;

              (4) Engage in manipulative acts or practices regarding the price of any foreign currency or a forex transaction;

              (5) Willfully submit materially false or misleading information to NFA or its agents with respect to forex transactions;

              (6) Embezzle, steal or purloin or knowingly convert any money, securities or other property received or accruing to any person in or in connection with a forex transaction.

            (c) Just and Equitable Principles of Trade

            Forex Dealer Members and their Associates shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their forex business.

            (d) Doing Business with Non-Members

            No Member may carry a forex account for, accept a forex order or account from, handle a forex transaction for or on behalf of, receive compensation (directly or indirectly) for forex transactions from, or pay compensation (directly or indirectly) for forex transactions to any non-Member of NFA, or suspended Member, that is required to be registered with the Commission as an FCM, RFED, IB, CPO, or CTA in connection with its forex activities and that is acting in respect to the account, order, or transaction for a forex customer, a forex pool or participant therein, a forex client of a commodity trading advisor, or any other person unless:

              (1) the non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by Board resolution; or

              (2) the suspended Member is exempted from this prohibition by the Appeals Committee.

            (e) Supervision

            Each Forex Dealer Member shall diligently supervise its employees and agents in the conduct of their forex activities for or on behalf of the Forex Dealer Member. Each Associate of a Forex Dealer Member who has supervisory duties shall diligently exercise such duties in the conduct of that Associate's forex activities for or on behalf of the Forex Dealer Member.

            (f) BASIC Disclosure

            When a customer first opens an account and at least once a year thereafter, each Forex Dealer Member shall provide each customer with written information regarding NFA's Background Affiliation Status Information Center (BASIC), including the web site address.

            (g) Filing Promotional Materials with NFA.

            The Compliance Director may require any Forex Dealer Member for any specified period to file copies of all promotional material with NFA for its review and approval at least 10 days prior to its first use or such shorter period as NFA may allow. The Compliance Director may also require a Forex Dealer Member to file for review and approval copies of promotional material prepared or used by some or all of the non-Members it is responsible for under Section (d).

            (h) Hypothetical Results

            Any Member who uses promotional material that includes a measurement or description or makes any reference to hypothetical forex transaction performance results that could have been achieved had a particular trading system of the Member or Associate been employed in the past must comply with Compliance Rule 2-29(c) and the related Interpretive Notice as if the performance results were for transactions in on-exchange futures contracts.

            (i) Customer Accounts

            A Forex Dealer Member must notify NFA prior to commencing customer business.

            (j) FDM Chief Compliance Officer

            Each Forex Dealer Member shall designate one principal to serve as Chief Compliance Officer (CCO). Each CCO must prepare an annual report that meets the requirements of CFTC Regulation 3.3(e) and must provide the annual report to the Forex Dealer Members Board of Directors or Senior Officer. Each Forex Dealer Member must submit the annual report to NFA within 90 days after the Forex Dealer Member's fiscal year end. The annual report must include a certification by the Forex Dealer Member's CCO or chief executive officer that to the best of his or her knowledge and reasonable belief, and under penalty of law, the information contained in the annual report is accurate and complete.

            (k) CFTC Forex Regulations

            Any Member or Associate that violates any of CFTC Regulations 5.2, 5.5, 5.10 through 5.19 or 5.23, as applicable, shall be deemed to have violated an NFA Requirement.

            (l) Customer Information and Risk Disclosure

              (1) Each Member or Associate shall, in accordance with the provisions of this subsection, obtain information from all customers and provide such customers with disclosure of the risks of forex trading.

              (2) The Member or Associate shall exercise due diligence to obtain the information and shall provide the risk disclosure at or before the time a customer first opens a forex trading account with or introduced by the Member or first authorizes the Member to exercise discretionary trading authority in a forex trading account. For an active customer who is an individual, the Member acting as the counterparty to the customer shall contact the customer, at least annually, to verify that the information obtained from the customer under paragraph (3) remains materially accurate, and provide the customer with an opportunity to correct and complete the information. Whenever the customer notifies the Member acting as the counterparty to the customer of any material changes to the information, a determination must be made as to whether additional risk disclosure is required to be provided to the customer based on the changed information. If an FCM or IB Member introduces the customer’s account or a CTA Member exercises discretionary trading authority over the account, then the Member acting as the counterparty to the customer must notify that FCM, IB or CTA Member of the changes to the customer’s information. The Member or Associate who currently solicits and communicates with the customer is responsible for determining if additional risk disclosure is required to be provided based on the changed information. In some cases, this may be the Member introducing or controlling the account; in other cases, it may be the Member acting as the counterparty to the customer account.

              (3) The information to be obtained from the customer shall include at least the following:

                (i) The customer's true name and address, and principal occupation or business;

                (ii) For customers who are individuals, the customer's current estimated annual income and net worth. For all other customers, the customer's net worth or net assets and current estimated annual income, or where not available, the previous year's annual income;

                (iii) For individuals, the customer's approximate age or date of birth;

                (iv) An indication of the customer's previous investment, futures trading and forex trading experience; and

                (v) Such other information deemed appropriate by such Member or Associate to disclose the risks of forex trading to the customer.

              (4) The risk disclosure to be provided to the customer shall include at least the following:

                (i) the Risk Disclosure Statement required by CFTC Regulation 5.5, if the Member is required by that Regulation to provide it; and

                (ii) the Risk Disclosure Statement required by CFTC Regulation 4.34, if the Member is required by that Regulation to provide it.

              (5) In the case of an account introduced by a Member or an account for which a Member CTA exercises discretionary trading authority, and except as otherwise provided in paragraph (2), it shall be the responsibility of the Member soliciting the account to comply with this Rule. However, if the account is introduced or managed by a non-NFA Member, it shall be the sole responsibility of the Member acting as a counterparty to the transaction to comply with this rule.

              (6) A Member or Associate shall be entitled to rely on the customer (as the sole source) for the information obtained under paragraph (3) and shall not be required to verify such information.

              (7) Each Member or Associate shall make or obtain a record containing the information obtained under paragraph (3) at the time the information is obtained. If a customer declines to provide the information set forth in paragraph (3), the Member or Associate shall make a record that the customer declined, except that such a record need not be made in the case of a non-U.S. customer. Each Member shall keep copies of all records made pursuant to this Rule in the form and for the period of time set forth in CFTC Regulation 1.31.

              (8) Each Member shall establish and enforce adequate procedures to review all records made pursuant to this Rule and to supervise the activities of its Associates in obtaining customer information and providing risk disclosure.

              (9) Nothing herein shall relieve any Member from the obligation to comply with all applicable CFTC Regulations and NFA Requirements.

            (m) Risk Management Program

            Each Forex Dealer Member must establish, maintain and enforce a Risk Management Program as prescribed by NFA's Board of Directors.

            (n) Public Disclosure by Forex Dealer Members

            Each Forex Dealer Member must make the following information readily available on its website and update such information as is necessary, but no less frequently than on an annual basis:

              (i) The name, title, business background, areas of responsibility, and the nature of the duties of each person that is a listed principal of the Forex Dealer Member;

              (ii) A discussion of the significant types of business activities and product lines engaged in by the Forex Dealer Member, and the approximate percentage of the Forex Dealer Member's assets and capital used in each type of activity;

              (iii) A discussion of the Forex Dealer Member's business on behalf of its customers, including types of customers, markets and currencies traded, international businesses, prime brokers and/or liquidity providers used, and the Forex Dealer Member's policies and procedures concerning the choice of bank depositories, custodians and counterparties to permitted transactions under CFTC Regulation 1.25;

              (iv) A discussion of the material risks associated with the Forex Dealer Member acting as a counterparty to eligible contract participants (ECP) as defined in Section 1a(18) of the Act, including any risks created by the Forex Dealer Member's affiliates and other ECPs acting as dealers;

              (v) A discussion of any pending or completed material administrative, civil, enforcement or criminal complaints or actions filed against the Forex Dealer Member during the last three years;

              (vi) A summary schedule of the Forex Dealer Member's adjusted net capital; net capital and excess net capital; all computed in accordance with CFTC Regulation 5.7 and reflecting balances as of the month-end for the most recent 12 months;

              (vii) The Statement of Financial Condition and all related footnotes that are part of the Forex Dealer Member's most current certified annual report pursuant to CFTC Regulation 1.16;

              (viii) The total customer liability as reported each day to NFA on the Forex Financial Report for the last 12 months; and

              (ix) The disclosure, displayed in a prominent manner, required by CFTC Regulation 5.5(e) for each of the most recent four calendar quarters during which the Forex Dealer Member maintained retail forex customer accounts.

            If any of the financial information required under (iv)-(vii) is amended, the Forex Dealer Member must clearly notate that it has been amended.

            (o) Disclosure of Transaction Data to Customers

              (1) Upon the request of an FDM's customer with respect to a particular executed forex transaction of that customer, an FDM must provide the customer, within 30 minutes of the customer's request, with the following transaction data for the 15 forex transactions that occur immediately before and after in the same currency pair of the customer's transaction:

                (i) Execution date and time (to the nearest millisecond in Eastern time);

                (ii) Customer side (i.e., buy or sell);

                (iii) Quantity;

                (iv) Currency pair;

                (v) Execution price (including any mark-up);

                (vi) Commission and other charges assessed by the FDM (if applicable); and

                (vii) Currency denomination of commission or other charges.

              Provided, however, that an FDM only has to provide transaction data pursuant to this subsection for any transactions that occur within 15 minutes before and after the execution of the customer's transaction.

              (2) Each FDM must provide NFA with a copy of any customer request made under subsection (1) above and the FDM's response in the form and manner prescribed by NFA.

              (3) Each FDM must inform customers of their ability to request this information by a notice prominently displayed on the FDM's website, each customer's trading portal and each customer transaction confirmation statement.

            (p) Scope

            This rule governs forex transactions as defined in Bylaw 1507(b).

            (q) Exemptions for Certain Transactions

            Transactions entered into through a Member to hedge currency exposure from positions on regulated exchanges are exempt from all forex requirements except sections (b) and (c) of this rule if the on-exchange transactions are handled by the same Member.

            (r) Definitions

            For purposes of this rule:

              (1) "Affiliate" means any person that controls, is controlled by, or is under common control with the Forex Dealer Member;

              (2) "Customer" means a counterparty that is not an eligible contract participant as defined in Section 1a(18) of the Act; and

              (3) "Dealer" means any person that (i) holds itself out as a dealer in forex or in retail commodity transactions as defined in 2(c)(2)(D) of the Act; (ii) makes a market in forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act; (iii) regularly enters into forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act with counterparties as an ordinary course of business for its own account; or (iv) engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act. Dealer includes other FDMs, as well as any entity acting in this manner that is not required to be an FDM.


            RULE 2-37. SECURITY FUTURES PRODUCTS.

            [Adopted effective August 21, 2001. Effective dates of amendments: April 16, 2002.]

            This rule applies to Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates.

              (a) No Member or Associate shall violate Sections 9(a), 9(b), or 10(b) of the Exchange Act or any applicable regulation thereunder in connection with any security futures product.

              (b) In addition to the supervisory requirements contained in NFA Compliance Rule 2-9, Members must establish, maintain and enforce written procedures reasonably designed to achieve compliance with applicable securities laws, including Sections 9(a), 9(b), and 10(b) of the Exchange Act and any applicable regulation thereunder.

              (c) Members who carry security futures accounts Act shall, not less than once a year, provide each security futures customer with written information regarding NFA's Background Affiliation Status Information Center (BASIC), including the web site address.

              (d) In addition to complying with Registration Rules 204(a) and 210(a), each Member shall notify NFA within 10 business days after the Member knows or should know that the Member or its associated person:

                (1) has been found by a self-regulatory organization or professional association in the accounting, banking, finance, insurance, law, real estate, or securities fields to have violated any provision of the securities laws or regulations or any rule or standard of conduct of the organization or association in connection with security futures transactions or to have engaged in conduct inconsistent with just and equitable principles of trade in connection with security futures transactions;

                (2) is the subject of a written customer complaint involving allegations of theft or misappropriation of funds or securities or of forgery in connection with security futures transactions;

                (3) is named as a defendant or respondent in any proceeding brought by a self-regulatory organization in the securities or insurance industry in connection with security futures transactions;

                (4) is a defendant or respondent in any civil litigation or arbitration proceeding or is subject to any other claim for damages involving security futures transactions that has been disposed of by judgment, award, or settlement for an amount exceeding $15,000 if the claim is against an associated person or $25,000 if the claim is against the Member;

                (5) is associated in any business or financial activity involving security futures products with any person who is subject to a statutory disqualification under either Section 8a of the Commodity Exchange Act or Section 15(b)(4) of the Exchange Act; or

                (6) is the subject of a disciplinary action taken by the Member for activities involving security futures products if it results in suspension, termination, the withholding of commissions or imposition of fines in excess of $2,500, or any significant limitation on the Associate's activities on a temporary or permanent basis.

              (e) In addition to complying with Registration Rules 206(a) and 210(b), each Associate shall promptly notify its sponsor of:

                (1) any information the Associate is required to report under Registration Rule 206(a) or 210(b); or

                (2) the existence of any of the circumstances listed in section (d) of this rule.

              (f) Each Member shall file a quarterly report with NFA containing statistical and summary information regarding written customer complaints involving security futures products. The report must be filed with NFA, in the form NFA requires, by the 15th day of the month following the calendar quarter in which the complaints are received. A Member is not required to file a quarterly report for any quarter in which no complaints were received.

              (g) Members shall not charge customers more than a fair commission or service charge for transactions in security futures products, taking into consideration all relevant circumstances, including the expense of executing the order and the value of any service the Member may have rendered by reason of its experience in and knowledge of the security futures product and the market in that product.


            RULE 2-38. BUSINESS CONTINUITY AND DISASTER RECOVERY PLAN.

            [Adopted effective April 7, 2003. Effective date of Amendments: October 18, 2010 and September 30, 2013.]

            (a) Each Member must establish and maintain a written business continuity and disaster recovery plan that outlines procedures to be followed in the event of an emergency or significant business disruption. The plan shall be reasonably designed to enable the Member to continue operating, to reestablish operations, or to transfer its business to another Member with minimal disruption to its customers, other Members, and the commodity futures markets.

            (b) Each FCM Member and FDM must provide NFA with, and keep current, the name and contact information for all key management employees, as identified by NFA, in the form and manner prescribed by NFA. In addition, each FCM Member and FDM must provide NFA with the location/address and telephone number of its primary and alternative disaster recovery sites.

            (c) Each IB, CPO and CTA Member must provide NFA with the name of and contact information for an individual who NFA can contact in the event of an emergency, and the Member must update that information upon request. Each IB, CPO, and CTA Member that has more than one principal must also provide NFA with the name of and contact information for a second individual who can be contacted if NFA cannot reach the primary contact, and the Member must update that information upon request. These individuals must be authorized to make key decisions in the event of an emergency.


            RULE 2-39. SOLICITING, INTRODUCING, OR MANAGING FOREX TRANSACTIONS OR ACCOUNTS.

            [Adopted effective September 15, 2005. Effective dates of amendments: February 13, 2007; June 5, 2007; September 21, 2007; October 25, 2007; April 1, 2009; October 18, 2010; October 1, 2011; and September 19, 2016.]

            (a) Members and Associates who solicit customers, introduce customers to a counterparty, or manage accounts on behalf of customers in connection with forex transactions shall comply with Sections (a), (b), (c), (d), (e), (g), (h), and (l) of Compliance Rule 2-36.

            (b) For purposes of this rule, the term "customer" means a person that is not an eligible contract participant as defined in Section 1a(18) of the Act and includes persons who participate in pooled accounts.


              RULE 2-40. BULK ASSIGNMENT OR LIQUIDATION OF FOREX POSITIONS; CESSATION OF CUSTOMER BUSINESS.

              [Adopted effective February 16, 2007. Effective dates of amendments: June 5, 2007; November 15, 2011; and February 28, 2017.]

              (a) Bulk Assignment, Transfer, or Liquidation. A Forex Dealer Member or an IB may not enter into a bulk assignment, transfer, or liquidation of forex positions or accounts unless the assignment, liquidation, or transfer complies with CFTC Regulation 5.23 and the procedures established by NFA in the Interpretive Notice entitled NFA Compliance Rule 2-40: Procedures for Bulk Assignment or Liquidation of Forex Positions; Cessation of Customer Business.

              (b) Ceasing Business. A Forex Dealer Member must notify NFA by e-mail or facsimile seven calendar days prior to ceasing its forex business.

              (c) Definitions. For purposes of this rule, the term "forex" has the same meaning as in Bylaw 1507(b) and the term "customer" means a counterparty that is not eligible contract participant as defined in 1a(18) of the Act.


              RULE 2-41. [RESERVED].


              RULE 2-42. [RESERVED].


              RULE 2-43. FOREX ORDERS

              [Adopted effective May 15, 2009. Effective dates of amendments: June 12, 2009 and September 11, 2009.]

              (a) Price Adjustments

                (1) A Forex Dealer Member may not cancel an executed customer order or adjust a customer account in a manner that would have the direct or indirect effect of changing the price of an executed order except when:

                  (i) the cancellation or adjustment is favorable to the customer and is done as part of a settlement of a customer complaint, provided, however, that individual customer complaints are not required in order for a Forex Dealer Member to favorably adjust all customer orders that were adversely affected by technical problems with the trading platform or by similar factors beyond the customer’s control and that are unrelated to market price movements (except that the Forex Dealer Member must adjust all customer orders adversely affected and may not, except as provided in section (a)(1)(ii), adjust any order that received a favorable price due to the problem); or

                  (ii) if a Forex Dealer Member exclusively uses straight-through processing such that the Forex Dealer Member automatically (without human intervention and without exception) enters into the identical but opposite transaction with another counterparty (creating an offsetting position in its own name) and that counterparty cancels or adjusts the price at which the position was executed.

                (2) With regard to cancellations or adjustments made pursuant to section (a)(1)(ii), a Forex Dealer Member must:

                  (i) provide written notification to the customer within fifteen (15) minutes of the customer order having been executed that it is seeking to cancel the executed order or adjust the customer's account to reflect the adjusted price provided by the Forex Dealer Member's counterparty, as applicable, and the written notification must include documentation of the cancellation or adjustment from the Forex Dealer Member's counterparty; and

                  (ii) either cancel or adjust all executed customer orders executed during the same time period and in the same currency pair or option regardless of whether they were buy or sell orders.

                (3) Notwithstanding section (a)(2)(ii), a Forex Dealer Member may choose to honor transactions in which customer orders resulted in profits for the customers but must do so with regard to all similarly situated customers.

                (4) Cancellations and adjustments to executed customer orders must be reviewed and approved by a listed principal that is also an NFA Associate. Such review and approval must be documented by a written record, must include any supporting documentation, and must be provided to NFA in the manner requested by NFA.

                (5) A customer order is considered executed upon the earlier of the customer receiving notification of the execution price from the Forex Dealer Member or when the position established by such order is identified in the customer's account, whether electronically or otherwise.

                (6) If a Forex Dealer Member may cancel or adjust an executed order under the circumstances provided for in section (a)(1)(ii), the FDM must provide customers with written notice that the Forex Dealer Member may cancel or adjust executed customer orders based upon liquidity provider price changes prior to the time they first engage in forex transactions with the Forex Dealer Member. The notice may be included in a customer agreement.

                (7) Any provision in a customer agreement or any contract between a Forex Dealer Member and a customer that reserves to the Forex Dealer Member the right to make price or equity adjustments to a customer account except as allowed by this Rule is prohibited.

              (b) Offsetting Transactions

                Forex Dealer Members may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis. At the customer's request, an FDM may offset same-size transactions even if there are older transactions of a different size but must offset the transaction against the oldest transaction of that size.


              RULE 2-44. [RESERVED].


              RULE 2-45. PROHIBITION OF LOANS BY COMMODITY POOLS TO CPOS AND AFFILIATED ENTITIES

              [Adopted effective September 11, 2009. Effective date of amendments: September 13, 2013.]

              No Member CPO may permit a commodity pool to use any means to make a direct or indirect loan or advance of pool assets to the CPO or any other affiliated person or entity; provided, however, that certain specified transactions set forth in the related Interpretive Notice entitled Prohibition of Loans by Commodity Pools to CPOs and Related Entities are not prohibited by this rule.


              RULE 2-46. CPO AND CTA QUARTERLY REPORTING REQUIREMENTS

              [Adopted effective March 31, 2010. Effective date of amendments: March 30, 2013; September 30, 2016; and June 30, 2017.]

              (a) Except as provided in paragraph (b) below, each CPO Member must file NFA Form PQR, in a form and manner prescribed by NFA, on a quarterly basis with NFA, for each pool that it operates and for which it has any reporting requirement under CFTC Regulation 4.27 within 60 days after the end of the quarters ending March, June and September, and a year-end report within 90 days of the calendar year end.

              (b) Each CPO Member that is required to file CFTC Form CPO-PQR on a quarterly basis pursuant to CFTC Regulation 4.27 will satisfy its NFA Form PQR filing requirements by filing CFTC Form PQR, along with any additional information in a form and manner prescribed by NFA, in accordance with CFTC Regulation 4.27.

              (c) Each CTA Member with a reporting requirement under CFTC Regulation 4.27 must file NFA Form PR, in a form and manner prescribed by NFA, on a quarterly basis with NFA within 45 days after the quarters ended March, June and September and a year-end report within 45 days of the calendar year end.

              (d) Each NFA Form PQR or NFA Form PR that is filed after it is due shall be accompanied by a fee of $200 for each business day it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action under the Compliance Rules for failure to comply with the deadlines imposed by NFA Compliance Rules or CFTC rules.


              RULE 2-47. [RESERVED].


              RULE 2-48. FOREX DEALER MEMBER DAILY TRADE DATA REPORTS

              [Adopted effective February 4, 2011. Effective date of amendments: December 2, 2013.]

              (a) Each Forex Dealer Member must file a daily electronic report of trade data with NFA using the electronic filing method required by NFA. The report must contain the data and be in the format prescribed by NFA. Each Forex Dealer Member must prepare the report as of 5:00 P.M. Eastern time and file it with NFA by 11:59 P.M. Eastern time the same day.

              (b) By submitting the report, the FDM certifies that the report is true and complete.

              (c) Each daily report that is filed after it is due shall be accompanied by a late fee of $1,000 for each business day that it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action for failure to comply with the deadlines imposed in this rule.


              RULE 2-49. SWAP DEALERS AND MAJOR SWAP PARTICIPANTS REGULATIONS

              [Adopted effective December 19, 2013. Effective dates of amendments: September 30, 2014.]

              (a) Any Swap Dealer or Major Swap Participant Member that violates CFTC Regulation 3.3 or any requirement under Part 23 of the CFTC's regulations, as applicable, shall be deemed to have violated an NFA Requirement.

              (b) A Swap Dealer or Major Swap Participant Member must promptly submit any reports, documents or notices, including those required under CFTC Regulation 3.3 or Part 23 of the CFTC's regulations, and any other supplemental information, to NFA and CFTC, as required by NFA, in the form and manner prescribed by NFA.


              Part 3 - Compliance Procedures

              RULE 3-1. DEPARTMENT OF COMPLIANCE.

              [Effective date of amendments: March 18, 1994.]

              (a) Duties.

              There is hereby established a Department of Compliance (hereinafter "Compliance Department"), under the direction and control of a Director of Compliance (hereinafter "Compliance Director"), which shall conduct audits and examinations, and shall investigate violations of NFA requirements, prepare reports and conduct prosecutions, as provided in this Part. The Compliance Department shall commence investigations at the direction of the Commission; upon the discovery or receipt of information by NFA (such as complaints from customers or Members) that, in the Compliance Director's opinion, indicates a possible basis for finding that a violation has occurred; on the Compliance Director's own initiative. The Compliance Director shall have the authority to compel testimony, subpoena documents and require statements under oath from any Member, Associate or person connected therewith.

              (b) Prohibitions.

              Neither the Compliance Director nor any employee or agent of the Compliance Department (including persons hired on a contract basis to perform compliance duties) may be a Member or Associate or have any connection, direct or indirect, with a Member or Associate, except as approved by the President. Except with the President's approval, the Compliance Director and any employee of the Compliance Department shall not trade, directly or indirectly, any commodity interest. A commodity interest shall be defined as any commodity futures or commodity option contract traded on or subject to the rules of a contract market or linked exchange, or cash commodities traded on or subject to the rules of a board of trade which has been designated as a contract market.


              RULE 3-2. INVESTIGATION.

              [Effective date of amendments: June 13, 1986; March 15, 1994 and March 12, 1999.]

              (a) Initiation; Report.

              In each case in which the Compliance Director has reason to believe that any NFA requirement is being, has been or is about to be violated, the Compliance Director shall submit a written report of the matter to the Business Conduct Committee. (See NFA Bylaw 704.) The report shall include:

                (i) the reason the investigation was begun;

                (ii) a summary of the complaint, if the investigation was begun as the result of a complaint;

                (iii) the relevant facts; and

                (iv) the Compliance Director's conclusion whether the Business Conduct Committee should proceed with the matter.

              (b) Termination.

              If upon completing the investigation the Compliance Director concludes that there is no reason to believe that an NFA requirement is being, has been or is about to be violated, the Compliance Director shall submit a report to the Business Conduct Committee, containing the information specified in paragraph (a) above and, if applicable, recommending whether the Business Conduct Committee should issue or authorize the Compliance Director to issue a warning letter. The report, and any warning letter issued, shall become part of the investigation file, which may thereafter be closed as the Compliance Director deems appropriate. Investigations shall be completed within four months of commencement except for good cause.

              (c) Review of Report.

              Each investigation report shall be reviewed by the Business Conduct Committee. If, upon review of the report, the Business Conduct Committee finds that additional investigation or evidence is necessary, it shall so instruct the Compliance Director. Within 30 days after receiving a completed report the Business Conduct Committee shall either:

                (i) close the matter, if it finds (A) no reasonable basis that a violation has occurred, is occurring or is about to occur; or (B) that prosecution is otherwise unwarranted (in which case the Business Conduct Committee may issue or cause to be issued a warning letter). The closure order shall be in writing and briefly state the reasons therefor, and a copy of the order shall be promptly furnished to the President. Such order shall become final 10 days after the President's receipt thereof unless, within such time, the President refers the matter to the Appeals Committee (See NFA Bylaw 702) for its review. In such case, the closure order shall become final 30 days after the date of referral by the President unless, within such time, the Appeals Committee directs the Business Conduct Committee to issue a complaint; or

                (ii) serve a written and dated Complaint, if it finds reason to believe that an NFA requirement is being, has been or is about to be violated and that the matter should be adjudicated.

              No member of the Business Conduct Committee or its designated Panel shall participate in the matter if the member, or any person with which the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).


              RULE 3-3. SERVICE.

              [Adopted effective March 15, 1994. Effective date of amendments: June 3, 1997; June 8, 2007; and December 10, 2007.]

              For purposes of any proceeding brought under Part 3 of these Rules:

              (a) service of a Complaint will be sufficient if mailed to the person charged ("the Respondent") by first class and overnight mail, to the last address provided by the Respondent on record with NFA, or the address of his duly authorized agent for service;

              (b) one copy of all pleadings, motions and briefs filed with NFA subsequent to the Complaint shall be served by the party upon all parties not in default (including the attorney of record in NFA's General Counsel's Office), unless otherwise provided. Service on a party's representative shall be service on the party. Service shall be made either by personal service (effective upon delivery), mail (effective upon deposit), facsimile (effective upon receipt of a readable document), or e-mail (effective upon receipt of a readable document): provided, however, that service by facsimile or e-mail shall only be permitted on Parties who have consented to service by that means. Proof of service of a document shall be made by attaching thereto an affidavit or certificate of service. To mail means to deposit in the U.S. Mail, first-class postage prepaid, or with an overnight delivery service, delivery fee prepaid; and

              (c) documents filed with NFA under this Part must be delivered or mailed to:

              National Futures Association
              300 South Riverside Plaza
              Chicago, IL 60606
              Attn: Legal Docketing Department

              or sent by facsimile to the attention of the Legal Docketing Department at a facsimile number provided in the original complaint or by e-mail to Docketing@nfa.futures.org. Filing by delivery or mailing is effective upon receipt. Filing by electronic means is effective upon receipt of a readable document; and

              (d) parties who file documents by electronic means thereby consent to accept service of pleadings in the proceedings by same method and waive any objection based on authenticity and genuineness to the use and admissibility into evidence in the proceeding of any document that they file by electronic means. The first document that a party files by electronic means must identify that party's facsimile number or e-mail address at which other parties may serve pleadings in the proceeding. Parties who provide a facsimile number or an e-mail address must advise Legal-Docketing and all other parties not in default of any change to the facsimile number or e-mail address.


              RULE 3-4. NOTICE OF CHARGES.

              [Adopted effective March 15, 1994, amendments effective September 17, 1999.]

              (a) A Complaint issued by the Business Conduct Committee under these Rules must:

                (i) state each NFA requirement alleged to be, to have been or about to be violated; and

                (ii) state each act or omission that constitutes, constituted or will constitute the alleged violation.

              (b) NFA shall advise the Respondent in writing:

                (i) that the Respondent must file a written Answer to the Complaint with NFA, within 30 calendar days of the date of the Complaint;

                (ii) that failure to file an Answer as provided in Part (i) above shall be deemed an admission of the facts and legal conclusions contained in the Complaint;

                (iii) that failure to respond to any allegation shall be deemed an admission of that allegation; and

                (iv) that failure to file an Answer as provided in Part (i) above shall be deemed a waiver of hearing.


              RULE 3-5. RIGHT TO COUNSEL.

              [Effective date of amendments: December 8, 1987; March 15, 1994; and March 12, 1999.]

              The Respondent may be represented by an attorney-at-law or other person at any stage of the investigation or disciplinary proceeding.


              RULE 3-6. ANSWER.

              [Effective date of amendments: March 15, 1994 and March 12, 1999.]

              (a) The Respondent must file a written Answer to the Complaint with NFA within 30 days from the date of the Complaint.

              (b) Failure to file a timely Answer shall be deemed an admission of the facts and legal conclusions contained in the Complaint, and a waiver of hearing. The Answer shall respond to each allegation in the Complaint by admitting, denying or averring that the Respondent lacks sufficient knowledge or information to admit or deny the allegation. An averment of insufficient knowledge or information may be made only after a diligent effort has been made to ascertain the relevant facts, and shall be deemed to be a denial of the pertinent allegation. The failure to respond to any allegation shall be deemed an admission of that allegation.

              (c) For good cause shown, the Business Conduct Committee, or a Hearing Panel may waive the effects of failure to file a timely or complete Answer.

              (d) On motion of the Respondent for good cause shown, then Chairman of the Business Conduct Committee, or another member of the Business Conduct Committee designated by the Chairman may grant an extension of time in which to comply with this Rule.


              RULE 3-7. APPOINTMENT OF HEARING PANEL.

              [Effective date of amendments: March 15, 1994; March 12, 1999; and December 10, 2007.]

              The Respondent shall be afforded a hearing on the charges and possible sanctions. The hearing shall be before a designated Hearing Panel of the Hearing Committee ("Hearing Panel"). A Hearing Panel shall consist of no fewer than three members of the Hearing Committee. The Chairman and the remaining members of the Hearing Panel shall be appointed by the Chairman of the Hearing Committee or his designee. If a Hearing Panel member's term on the Hearing Committee expires while the member is serving on a Hearing Panel, the member may continue to serve on that Hearing Panel until the matter is concluded. The hearing shall be held at such location as the Chairman of the Hearing Panel shall determine.


              RULE 3-8. PRE-HEARING PROCEDURES.

              [Effective date of amendments: March 15, 1994 and March 12, 1999.]

              (a) The Respondent shall be entitled to a reasonable pre-hearing examination of all evidence in the Compliance Department's possession or under its control that is to be relied upon by the Compliance Department or that is relevant to the Complaint. Such pre-hearing examination:

                (i) must be requested by the Respondent in writing;

                (ii) can be conducted either by the Respondent examining all such evidence at the offices of NFA, or by the Respondent requesting that all such evidence be copied and sent to him with any transportation and copying costs borne by the Respondent making the request;

                (iii) is subject to the Compliance Department's right to withhold any privileged material (including, but not limited to, the investigation report), pursuant to all common law and statutory privileges it has available to it.

              (b) Within 30 days after the Chairman of the Hearing Panel is appointed, the Chairman shall schedule and hold a pre-hearing conference with the parties. The order scheduling the pre-hearing conference shall specify the issues to be covered in the pre-hearing conference, including setting discovery and motion deadlines and scheduling the hearing. Such conferences may be conducted by telephone.

              (c) The Chairman of the Hearing Panel shall schedule pre-hearing conferences and hearing sessions and shall decide all pre-hearing motions concerning discovery, motion deadlines, location of the hearing, continuances, and requests for telephonic or video testimony. All other motions shall be decided by the Hearing Panel.

              (d) A motion for continuance shall be supported by an affidavit that provides a detailed description of the circumstances that form the basis for the continuance request.


              RULE 3-9. HEARING.

              [Effective date of amendments: January 28, 1986; April 30, 1986; March 15, 1994; February 2, 1995 and March 12, 1999.]

              If a hearing is held:

              (a) The formal rules of evidence need not apply;

              (b) Telephonic testimony shall be permitted if ordered by the Hearing Panel;

              (c) The Respondent may appear personally, examine any witnesses, call witnesses and present relevant testimony and other evidence;

              (d) Any party to a hearing may move for an order or the Hearing Panel, on its own motion, may issue an order requiring an NFA Member, Associate, or person connected therewith to testify or produce documents at a hearing at the moving party's expense. Such an order is discretionary with the Hearing Panel and shall be issued only for good cause shown; and

              (e) A substantially verbatim record of the hearing shall be made (i.e., one that can be accurately transcribed). The cost of transcription shall be borne by the Respondent only if it requests the transcript, appeals the decision under Rule 3-13 below, or applies for Commission review and review is granted (See paragraph (f)(iii) of Rule 3-13). Otherwise, any transcription costs shall be borne by NFA.

              No member of the Hearing Panel shall participate in the matter if the member, or any person with which the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).


              RULE 3-10. DECISION.

              [Effective date amendments: December 8, 1987 and March 15, 1994.]

              After the hearing or other consideration of the matter, the Hearing Panel shall render a written decision, based upon the weight of the evidence, containing:

              (a) the charges or a summary of the charges;

              (b) the Answer, if any, or a summary of the Answer;

              (c) a brief summary of the evidence produced at the hearing, or, where appropriate, incorporation by reference of the investigation report;

              (d) a statement of findings and conclusions as to each allegation, including a statement setting forth: each act or practice the Respondent was found to have committed or omitted, is committing or omitting, or is about to commit or omit; each NFA requirement that such act or practice violated, is violating, or is about to violate; and whether the act or practice is deemed to constitute conduct inconsistent with just and equitable principles of trade;

              (e) a declaration of any penalty imposed (See Rule 3-14) and the penalty's effective date; and

              (f) a statement that the Respondent may appeal an adverse decision to the Appeals Committee by filing a written notice of appeal with NFA within 15 days after the date of the decision.

              The decision shall be dated and promptly furnished to the Respondent and the Appeals Committee and shall be final upon expiration of time for appeal or review of the decision. (See Rule 3-13.)


              RULE 3-11. SETTLEMENT.

              [Effective date of amendments: December 8, 1987; March 15, 1994; March 24, 1998; and March 12, 1999.]

              (a) Offer.

                (i) A subject of an investigation in which the investigation report has been completed, or a Respondent in a disciplinary proceeding, shall submit any proposed settlement of the matter to the Business Conduct Committee or its designated Panel ("BCC Panel") at any time up until a Chairman of the Hearing Panel has been appointed. A BCC Panel shall consist of no fewer than three members of the Business Conduct Committee, each of whom shall be appointed by the Chairman of the Business Conduct Committee. After that date, any proposed settlement offer shall be submitted to the Hearing Panel. Settlement offers may also be submitted to the Appeals Committee if the matter is before it on appeal or review. The Business Conduct Committee, BCC Panel, Hearing Panel or Appeals Committee may accept or reject the settlement offer as it deems appropriate. The Compliance Director shall be afforded an opportunity to express the Compliance Department's views with respect to the proposed settlement;

                (ii) The Business Conduct Committee, BCC Panel, Hearing Panel or Appeals Committee may in its discretion accept an offer in which the person neither admits nor denies violating NFA requirements; and

                (iii) Every settlement offer:

                  (a) shall contain the following language:
                  [Respondent] acknowledges that the Compliance Department will present the settlement offer and its views on the proposed settlement orally, in writing or both;

                  (b) presented to the Business Conduct Committee or BCC Panel shall also contain the following language:
                  [Respondent] acknowledges that any settlement offer rejected by the Business Conduct Committee or BCC Panel will be forwarded to the Hearing Panel for its information in the event that [Respondent] subsequently submits a settlement offer to the Hearing Panel;

                  (c) presented to the Hearing Panel shall also contain the following language:
                  [Respondent] waives any objection to the Hearing Panel's participation in the hearing in the event that [Respondent's] settlement offer is rejected; and

                  (d) presented to the Appeals Committee shall also contain the following language:
                  [Respondent] acknowledges that any settlement offer rejected by the Appeals Committee will be forwarded to the Business Conduct Committee, BCC Panel or Hearing Panel for its information in the event that [Respondent] subsequently submits a settlement offer to the Business Conduct Committee, BCC Panel or Hearing Panel. [Respondent] waives any objection to the Appeals Committee's participation in the review in the event that [Respondent's] settlement offer is rejected; and

                  (e) shall also contain the following language:
                  [Respondent] acknowledges that this settlement offer may not be withdrawn by the [Respondent] after it has been submitted to the Business Conduct Committee, BCC Panel, Hearing Panel or Appeals Committee. In the event the settlement offer is rejected by the appropriate Committee or Panel, the settlement offer shall become null and void.

              (b) Decision.

              If the Business Conduct Committee, BCC Panel, Hearing Panel or Appeals Committee accepts the offer, it shall issue a written decision specifying each NFA requirement it has reason to believe is being, has been or is about to be violated, any penalty imposed and whether the settling party has admitted or denied any violation.

              A decision on settlement by the Business Conduct Committee, BCC Panel or Hearing Panel shall be promptly furnished to the President. A decision on settlement by the Business Conduct Committee, BCC Panel or Hearing Panel shall become final and binding 15 days after the date of the decision unless the President, with notice to all parties, refers the matter to the Appeals Committee for review. The Appeals Committee shall approve or disapprove the settlement within 30 days after the date of such referral. Its decision to approve or disapprove the settlement shall become final and binding 15 days after the date of that decision.

              A decision on settlement by the Appeals Committee shall become final and binding 15 days after the date of the decision.

              (c) Withdrawal of Settlement Offer Is Prohibited.

              A settlement offer may not be withdrawn by a Respondent after it is submitted to the Business Conduct Committee, BCC Panel, Hearing Panel or Appeals Committee. An offer that is rejected by the appropriate Committee or Panel shall be null and void and shall not be deemed to have been an admission of any matter.


              RULE 3-12. NOTICE AND PUBLICATION OF DECISION.

              [Effective date of amendments: March 15, 1994.]

              Written notice of any action taken under Rule 3-10 or Rule 3-11 that is adverse to the Respondent, including reasons, findings, and conclusions, shall be furnished to the Commission within 30 days after it becomes final.


              RULE 3-13. APPEAL; REVIEW.

              [Effective date of amendments: December 8, 1987; October 29, 1991; March 15, 1994; February 2, 1995 and March 12, 1999.]

              (a) Appeal.

              The Respondent may appeal any adverse decision of the Hearing Panel issued under Rule 3-10 to the Appeals Committee by filing a written notice of appeal with NFA within 15 days after the date of the decision. The notice must describe those aspects of the disciplinary action to which exception is taken, and must contain any request by the Respondent to present written or oral argument.

              (b) Review.

              The Appeals Committee may also order review of any decision of the Hearing Panel issued under Rule 3-10. If such a review will be conducted, the Appeals Committee will give written notice to the Respondent within 15 days of the date of the decision. Such review may be conducted by the Appeals Committee:

                (i) on its own motion, or

                (ii) pursuant to a petition filed by the Compliance Department, the granting of which shall be discretionary with the Appeals Committee. The petition will state why the Compliance Department is seeking review and must contain any request by the Compliance Department to present written or oral argument.

              (c) Stay.

              The Respondent's filing of a notice of appeal under paragraph (a) above or the institution by the Appeals Committee of its own review under paragraph (b) above shall operate as a stay of the effective date of the disciplinary order, until the Appeals Committee renders its decision.

              (d) Conduct of Proceeding.

              No member of the Appeals Committee shall participate in the proceeding if the member participated in any prior stage of the disciplinary proceeding (other than the review of a settlement offer submitted under Rule 3-11) or if the member, or any person with which the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c). Except for good cause shown, the appeal or review shall be conducted solely on the record before the Hearing Panel, the written exceptions filed under paragraph (a) above, and such written or oral arguments of the parties as the Appeals Committee may authorize.

              (e) Briefs.

              If the Appeals Committee authorizes written argument, briefs shall be filed as follows unless otherwise ordered by the Appeals Committee:

                (i) the party required to submit the initial brief shall file it with NFA's Legal Docketing Department and serve it on the other parties to the appeal within 30 days after the Appeals Committee issues an order authorizing written argument;

                (ii) the responding party shall file its brief with NFA's Legal Docketing Department and serve it on the other parties to the appeal within 30 days after service of the initial brief;

                (iii) the party which filed the initial brief may file an answer to the responding brief with NFA's Legal Docketing Department and serve it on the other parties to the appeal within 10 days after service of the responding party's brief;

                (iv) the initial brief or responding brief of any party shall not exceed 35 pages and the answer to the responding brief shall not exceed 10 pages, exclusive of any table of contents, table of cases, index and appendix containing transcripts of testimony, exhibits, rules and regulations; and

                (v) no other written argument on substantive issues raised on appeal will be accepted from the parties or considered by the Appeals Committee.

              (f) Decision.

              Promptly after reviewing the matter, the Appeals Committee shall issue a written and dated decision, based on the weight of the evidence. The decision shall include:

                (i) the findings and conclusions of the Appeals Committee as to each charge and penalty reviewed, including the specific NFA requirement the Respondent was found by the Hearing Panel to have violated, to be violating, or to be about to violate;

                (ii) a declaration of any penalty imposed by the Appeals Committee, the basis for its imposition, and its effective date;

                (iii) a statement that any person aggrieved by the disciplinary action may appeal the action pursuant to Commission Regulations, Part 171, within 30 days of service; and

                (iv) a statement that any person aggrieved by the disciplinary action may petition the Commission for a stay of the effective date pursuant to Commission Regulations, Part 171, within 10 days of service.

              (g) Finality.

              The decision of the Appeals Committee shall be final 30 days after the date of service.


              RULE 3-14. PENALTIES.

              [Effective date of amendments: December 8, 1987; July 30, 1990 and March 15, 1994.]

              (a) Types of Penalties.

              The Business Conduct Committee, BCC Panel or Hearing Panel, or the Appeals Committee on appeal or review, may at the conclusion of the disciplinary proceeding impose one or more of the following penalties:

                (i) Expulsion, or suspension for a specified period, from NFA membership; a two-thirds vote of the members of the Hearing Panel or the Appeals Committee present and voting shall be required for expulsion. A suspended Member shall be liable for dues and assessments but shall have no membership rights during the suspension period nor shall a suspended Member hold itself out as an NFA Member during the suspension period;

                (ii) Bar or suspension for a specified period from association with an NFA Member;

                (iii) Censure or reprimand;

                (iv) A monetary fine, not to exceed $250,000 per violation;

                (v) Order to cease and desist; and

                (vi) Any other fitting penalty or remedial action not inconsistent with this rule.

              (b) Authority of Appeals Committee to Alter Penalty.

              The Appeals Committee may increase, decrease or set aside the penalties that were imposed by the Hearing Panel, or may impose other and different penalties, as it sees fit, subject to the requirements and limitations in paragraph (a) above.

              (c) Payment of Fines.

              All fines shall be paid to the NFA Treasurer within 30 days of the date of the decision or within the time prescribed in the decision, and may be used for general NFA purposes. A person who fails to pay a fine on time may, after seven days written notice, be summarily suspended from membership or association with a Member, by order of the President, until the fine is paid.


              RULE 3-15. MEMBER OR ASSOCIATE RESPONSIBILITY ACTIONS.

              [Effective date of amendments: December 8, 1987; October 29, 1991; September 30, 1992; March 15, 1994; February 2, 1995; March 12, 1999 and November 30, 2001.]

              (a) Nature of Action.

              A Member or Associate may be summarily suspended from membership, or association with a Member, may be required to restrict its operations (e.g., restrictions on accepting new accounts), or may otherwise be directed to take remedial action, (e.g., may be ordered to immediately infuse additional capital or to maintain its adjusted net capital at a level in excess of its current capital requirement), where the President, with the concurrence of the NFA Board of Directors or Executive Committee, has reason to believe that the summary action is necessary to protect the commodity futures markets, customers, or other Members or Associates. No member of either the Board of Directors or the Executive Committee shall participate in a summary action if the member, or any person with whom the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 516 or Bylaw 708(c). Notice of such summary action shall be given promptly to the Commission.

              (b) Procedure.

              The following procedures shall be observed in actions under this Rule:

                (i) The subject of the action (the "Respondent") shall, whenever practicable, be served with a notice before the action is taken. If prior notice is not practicable, the Respondent shall be served with a notice at the earliest opportunity. This notice shall (A) state the action taken or to be taken; (B) briefly state the reasons for the action; (C) state the time and date when the action became or becomes effective and its duration; and (D) state that any person aggrieved by the action may petition the Commission for a stay of the effective date of the action pending a hearing pursuant to Commission Regulations, Part 171, within 10 days of service. Service may be made by personal delivery (effective upon receipt), by telefax (effective upon transmission), or by mail (effective upon deposit). When service is effected by mail, the time within which the person served may respond shall be increased by five days.

                (ii) The Respondent shall be given an opportunity for a hearing promptly after the summary action is taken. Any such hearing shall be conducted before a Hearing Panel under the procedures of Rule 3-9.

                (iii) The Respondent shall have the right to be represented by an attorney-at-law or other person in all proceedings after the summary action is taken, but the Hearing Panel may bar from the proceeding any representative for dilatory, disruptive, or contumacious conduct.

                (iv) Promptly after the hearing, the Hearing Panel shall issue a written and dated decision affirming, modifying or reversing the action taken, based upon the evidence contained in the record of the proceeding. A copy of the decision shall be furnished promptly to the Respondent, the Appeals Committee and the Commission. The decision shall contain:

                  (A) A description of the action taken and the reasons for the action;

                  (B) A brief summary of the evidence received at the hearing;

                  (C) Findings and conclusions;

                  (D) A determination as to whether the summary action that was taken should be affirmed, modified or reversed; a declaration of any action to be taken against the Respondent as the result of that determination; the effective date and duration of that action; and a determination of the appropriate relief based on the findings and conclusions;

                  (E) A statement that any person aggrieved by the action may have a right to appeal the action pursuant to Commission Regulations, Part 171, within 30 days of service; and

                  (F) A statement that any person aggrieved by the action may petition to the Commission for a stay pursuant to Commission Regulations, Part 171, within 10 days of service.

              (c) Appeal.

              The Respondent shall have no right to appeal a final action taken under this Rule to the Appeals Committee.

              (d) Review.

              The Appeals Committee may on its own motion review a decision of the Hearing Panel issued under paragraph (b)(iv) above, by giving written notice to the Respondent of its decision to review within 15 days of the date of the decision. The review shall be conducted in accordance with paragraphs (d), (e), (f) and (g) of Rule 3-13.


              RULE 3-16. RELATIONSHIP BETWEEN MEMBER OR ASSOCIATE RESPONSIBILITY ACTION AND DISCIPLINARY ACTION.

              [Effective date of amendments: March 15, 1994.]

              The institution of a Member or Associate Responsibility Action (See Rule 3-15) shall not preclude the institution, at the same or any other time, of a disciplinary action (See Rule 3-2) involving the same matters or persons, nor shall any pending or completed disciplinary action involving the same matters or persons preclude a proceeding under Rule 3-15.


              RULE 3-17. COMPOSITION OF COMMITTEES.

              [Adopted effective December 10, 1993. Effective dates of amendments: January 1, 2005; and February 20, 2014.]

              The Business Conduct Committee, Hearing Committee, Appeals Committee, Executive Committee, BCC Panel and Hearing Panel conducting a proceeding under these Part 3 rules shall include at least one member who is not an NFA Member or Associate or an employee of an NFA Member. If the proceeding involves swaps or any respondent is a SD or MSP Member, at least one member of the Hearing Panel shall also be affiliated with an SD or MSP. When selecting Hearing Panels, the Chairman of the Hearing Committee or his designee shall endeavor to appoint panelists with diverse interests.


              RULE 3-18. SANCTIONS FOR CONTUMACIOUS CONDUCT.

              If a party, attorney for a party, or other representative of a party violates an order of the Business Conduct Committee, Hearing Panel, Chairman of the Business Conduct Committee or Hearing Panel, or Appeals Committee or engages in dilatory, disruptive, or contumacious conduct during a proceeding, the Business Conduct Committee, Hearing Panel, or Appeals Committee may impose those sanctions that are just under the circumstances. In particular, the Business Conduct Committee, Hearing Panel, or Appeals Committee may -

              (a) Find that matters covered by the order or any other designated facts shall be taken as established against the noncomplying party;

              (b) Refuse to allow the noncomplying party to support or oppose designated claims or defenses or prohibit the noncomplying party from introducing designated witnesses or documents into evidence;

              (c) Strike portions of the noncomplying party's Complaint or Answer;

              (d) Stay further proceedings until the noncomplying party complies with the order;

              (e) Dismiss the Complaint if the Compliance Department is the noncomplying party or find the relevant facts and legal conclusions in the Complaint to be admitted if a Respondent is the noncomplying; or

              (f) Bar an attorney or other representative from the proceeding if the attorney or representative has engaged in dilatory, disruptive, or contumacious conduct.


              Part 4 - Procedures Governing Access to and Certification of CFTC Records, Other than Registration Records, maintained by NFA

              RULE 4-1. DISCLOSURE OF INFORMATION FROM CFTC RECORDS, OTHER THAN REGISTRATION RECORDS, MAINTAINED BY NFA.

              [Adopted effective June 2, 2006.]

              (a) Definitions.

                (1) CFTC Records. For purposes of Rules 4-1 and 4-2, the term "CFTC records" shall be defined to include only those records that are in the custody of or maintained by NFA because such records were transferred from the Commission to NFA or because the Commission has delegated to NFA the authority to receive, generate, compile or maintain such records in performance of functions which NFA is authorized or required by the Commission to perform pursuant to Sections 8a(10) or 17(o) of the Act: Provided, however, that for purposes of Rules 4-1 and 4-2, the term "CFTC records" shall not include registration records subject to Part 700 of NFA's Registration Rules.

              (b) Disclosure of Public Information.

                (1) If any member of the public requests access to CFTC records, or portions thereof, and the requested record, or portion, is "public" or "publicly available" under CFTC Regulations 1.10(g) or 145.0, then NFA will release that record or portion to the requester.

                (2) NFA may charge any member of the public a copying fee, not to exceed the fee charged by the Commission, for any copies of CFTC records provided by NFA directly to the requester.

              (c) Disclosure of Non-Public Information. Requests for access to CFTC records, or portions thereof, not subject to disclosure as public or publicly available under paragraph (b)(1) of this Rule shall be referred or transmitted to the Commission for response; except that, NFA will disclose such records or portion thereof:

                (1) otherwise with the authorization of the Assistant Secretary of the Commission for FOI, Privacy and Sunshine Act Compliance or his or her designee, or the General Counsel of the Commission or his or her designee, in accordance with CFTC Regulations 145.7(b), (h) and (i); the Freedom of Information Act, 5 U.S.C. § 552; and the Privacy Act, 5 U.S.C. § 552a; and

                (2) to any individual or firm, or person acting on behalf of the individual or firm, who seeks access to his, her or its CFTC records: Provided, however, that NFA receives proper verification of the identity and authority of the party requesting the records.


              RULE 4-2. CERTIFICATION OF THE AUTHENTICITY OF CFTC RECORDS MAINTAINED BY NFA.

              [Adopted effective June 2, 2006.]

              (a) Designation of Custodian and Deputies. The President shall designate an NFA employee to serve as the NFA Record Custodian ("Custodian"). The President also may designate one or more NFA employees to serve as Deputy NFA Record Custodians ("Deputies"). The Custodian and the Deputies shall be responsible for maintaining all CFTC records in NFA's possession and shall be the legal custodians of these CFTC records.

              (b) Authority of Custodian and Deputies. The Custodian, each of the Deputies, or in their absence, any NFA employee designated by the President, the Custodian or one of the Deputies, is authorized to certify in writing the authenticity of CFTC records in NFA's possession for purposes of any judicial or administrative proceeding. The Custodian, each of the Deputies or any designated employee also is authorized to certify in writing as to the maintenance and completeness of the CFTC records in NFA's possession, as well as the thoroughness of NFA's search for requested documents, for purposes of any judicial or administrative proceeding.

              (c) Effectiveness of Certification. This written certification shall be effective when executed by the Custodian, one of the Deputies or any designated employee.

              (d) Content of Certification. The written certification shall include that, pursuant to Commission authorization, the Custodian has and maintains legal custody of the official CFTC records that are the subject of the certification.


              Code of Arbitration


              SECTION 1. DEFINITIONS.

              [Effective dates of amendments: April 11, 1983; July 27, 1983; February 1, 1988; November 9, 1988; January 1, 1990; February 18, 1992; May 1, 1994; March 1, 2002; September 9, 2002; December 1, 2003; August 30, 2006; February 13, 2007; June 5, 2007; October 18, 2010; October 1, 2011; and September 19, 2016.]

              As used in this Code:

              (a) "Aggregate Claim" - means an Arbitration Claim plus any counterclaim, cross-claim and third-party claim filed in the same matter under this Code.

              (b) "Arbitration Claim" - means a claim filed by the person instituting the Arbitration proceeding.

              (c) "Associate" - means a person who is registered with NFA as an Associate or was so registered when the acts or transactions that are the subject of dispute occurred. (Under NFA Bylaws every person who is associated with a Member within the meaning of the term "associated person" as used in Section 4k of the Commodity Exchange Act, and who is required to be registered as such with the Commission, must register with NFA as an Associate.)

              (d) "Claim" - means an Arbitration Claim, counterclaim, cross-claim or third-party claim filed under this Code.

              (e) "Claimant" - means a person making a proper and timely claim under this Code.

              (f) "Commission" - means the Commodity Futures Trading Commission.

              (g) "Commodity Pool Operator" or "CPO" - means a commodity pool operator as that term is used in the Commodity Exchange Act, and that is required to be registered as such under the Commodity Exchange Act and Commission Rules.

              (h) "Commodity Trading Advisor" or "CTA" - means a commodity trading advisor as that term is used in the Commodity Exchange Act, and that is required to be registered as such under the Commodity Exchange Act and Commission Rules.

              (i) "Contract Market" - means an exchange designated by the Commission as a contract market in one or more commodities.

              (j) "Cross-claim" - means a claim filed by one Respondent against a co-Respondent.

              (k) "Futures Commission Merchant" or "FCM" - means a futures commission merchant as that term is used in the Commodity Exchange Act, and that is required to be registered as such under the Commodity Exchange Act and Commission Rules.

              (l) "Floor Broker" - means a floor broker as that term is used in the Commodity Exchange Act.

              (m) "Forex" - has the same meaning as in Bylaw 1507(b).

              (n) "Forex Dealer Member" - has the same meaning as in Bylaw 306.

              (o) "Futures" - includes:

                (1) futures and options contracts traded on a Commission-licensed exchange;

                (2) options contracts granted by a person that has registered with the Commission under Section 4c(d) of the Act as a grantor of such option contracts or has notified the Commission under the Commission's Rules that it is qualified to grant such option contracts;

                (3) foreign futures and foreign options transactions made or to be made on or subject to the rules of a foreign board of trade for or on behalf of foreign futures and foreign options customers as those terms are defined in the Commission's rules;

                (4) leverage transactions as that term is defined in the Commission's Rules;

                (5) security futures products, as that term is defined in Section 1a(45) of the Act; and

                (6) forex transactions (for purposes of jurisdiction under this Code).

              (p) "Introducing Broker" or "IB"-means an introducing broker as that term is used in the Commodity Exchange Act, and that is required to be registered as such under the Commodity Exchange Act and Commission Rules.

              (q) "Leverage Transaction Merchant" or "LTM"-means a leverage transaction merchant as that term is used in Commission Rules, and that is required to be registered as such under the Commodity Exchange Act and Commission Rules.

              (r) "Member" - means a Member of NFA or a person that was a Member at the time the acts or transactions that are the subject of the dispute occurred.

              (s) "NFA" - means National Futures Association.

              (t) "Panel" - means the arbitration panel appointed pursuant to Section 4(a) of this Code.

              (u) "Person" - includes individuals, corporations, partnerships, trusts, associations and other entities.

              (v) "Pleading" - means an Arbitration Claim, counter-claim, cross-claim, third-party claim, Answer or Reply filed under this Code.

              (w) "President" - means the President of NFA.

              (x) "Respondent" - means a person against whom a claim is asserted under this Code.

              (y) “Retail Foreign Exchange Dealer” or “RFED” - means a retail foreign exchange dealer as that term is used in the Commodity Exchange Act, and that is required to be registered as such under the Commodity Exchange Act and Commission Rules.

              (z) "Secretary" - means the Secretary of NFA.

              (aa) "Third-party Claim" - means a claim filed by a Respondent against a person not a party to the action.


              SECTION 2. ARBITRABLE DISPUTES.

              [Effective dates of amendments: April 11, 1983; June 28, 1985; November 9, 1988; June 12, 1989; January 1, 1990; February 18, 1992; September 8, 1992; May 17, 1993; May 1, 1994; March 1, 2002; September 9, 2002; December 15, 2003; and October 18, 2010.]

              (a) Mandatory Arbitration.

                (1) Claims. Except as provided in Sections 5 and 6 of this Code with respect to timeliness requirements, the following disputes shall be arbitrated under this Code if the dispute involves commodity futures contracts:

                  (i) a dispute for which arbitration is sought by a customer against a Member or employee thereof, or Associate, provided that:

                    (A) the customer is not an FCM, floor broker, Member or Associate;

                    (B) the dispute does not solely involve cash market transactions that are not part of or directly connected with a commodity futures transaction; and

                    (C) if brought against a Member or employee thereof, the Member is an FCM, an RFED, an IB, a CPO, a CTA or an LTM.

                  (ii) a customer claim that is required to be arbitrated by NFA under a lawful agreement that complies with Commission Rule 166.5.

                  (iii) a customer claim whose resolution has been delegated to NFA by a contract market.

                (2) Counterclaims, Cross-claims and Third-party Claims. Except as provided in Sections 5 and 6 of this Code with respect to timeliness requirements, a counterclaim, cross-claim or third-party claim may be asserted in an arbitration brought under this Code if the counterclaim, cross-claim or third-party claim arises out of an act or transaction that is the subject of the Arbitration Claim.

              (b) Disputes Which May Be Arbitrated in the President's Discretion.

                (1) At the option of any party, the securities portion of a dispute involving unrelated futures and securities claims may, in the President's discretion, be arbitrated under this Code if the timeliness requirements of Sections 5 and 6 of this Code are met.

                (2) Except as required by the Member Arbitration Rules, other disputes involving commodity futures contracts between or among customers, Members, or Associates may, in the President's discretion, be arbitrated under this Code if the parties agree or have agreed to such arbitration and the timeliness requirements of Sections 5 and 6 of this Code are met.


              SECTION 3. PRE-DISPUTE ARBITRATION AGREEMENTS.

              [Effective dates of amendments: June 13, 1986; November 9, 1988; January 1, 1990; September 9, 2002; and October 18, 2010.]

              Any pre-dispute arbitration agreement between a customer and an FCM, RFED, IB, CPO, CTA or LTM Member or Associate thereof that does not comply with Commission Rule 166.5 shall be unenforceable under this Code.


              SECTION 4. ARBITRATION PANEL.

              [Effective dates of amendments: November 24, 1982; January 28, 1986; November 9, 1988; July 12, 1989; October 29, 1990; February 18, 1992; May 1, 1994; June 23, 1997; May 1, 2001 and October 1, 2009]

              (a) Appointment of Panel.

              NFA shall conduct all arbitration proceedings under this Code before an arbitration Panel consisting of the following:

                (1) Where the aggregate claim amount does not exceed $100,000, NFA shall appoint one arbitrator. However, if the aggregate amount of the claim exceeds $50,000 but is not more than $100,000, NFA shall appoint three arbitrators if all parties serve a written request on NFA for three arbitrators by no later than 30 days after the last pleading is due or the sole arbitrator asks NFA to appoint two additional arbitrators.

                (2) Where the aggregate claim amount exceeds $100,000, NFA shall appoint three arbitrators.

              All arbitration Panels shall be appointed by the Secretary and consist of individuals who are NFA Members or individuals connected therewith (one such Member or individual designated as Panel Chairperson). Provided, however, if a customer so requests in a timely filed pleading, the Chairperson and at least one other arbitrator, and the sole arbitrator where there is a single-person Panel, shall not be connected with an NFA Member or NFA (except as NFA arbitrators). For purposes of this section, any individual who performs a significant amount of work on behalf of NFA Members or Associates and any individual who was a Member or Associate or was an employee of a Member within the past three years shall be considered to be connected with an NFA Member.

              (b) Disclosures Required.

              Prior to being appointed to the Panel, each arbitrator under consideration shall disclose to NFA any circumstances that might prevent the arbitrator from acting impartially.

              (c) Appointment of Panel; Disclosure and Challenge.

              The Secretary shall thereupon appoint, pursuant to Section 4(a), an arbitration Panel to resolve the dispute. No arbitrator shall have acted as the mediator in the same dispute. NFA shall promptly notify the parties of the names, business affiliations and other information relevant to the classification of the arbitrator as a Member or non-Member panelist. Any objection of a party to such appointment shall be specific and for cause and submitted to NFA in written form. Each party or their representative shall disclose to NFA any circumstances likely to affect an arbitrator's impartiality, including any bias or any financial interest in the result of the arbitration or any past or present relationship with the arbitrator. Any party who fails to disclose such information shall be deemed to have waived any objection to that arbitrator based on such information. Each arbitrator appointed shall disclose to NFA any circumstances likely to affect impartiality, including any bias or any financial interest in the result of the arbitration or any past or present relationship with the parties or their representative. Upon receipt of such information from an arbitrator or other source, NFA shall communicate such information to the parties, and if NFA deems it appropriate to do so, to the Panel and others. Thereafter, NFA shall determine whether the arbitrator should be disqualified and shall inform the parties of the decision, which shall be conclusive.

              (d) Arbitrator's Oath.

              Before proceeding with the hearing, each arbitrator shall execute an oath whereby the arbitrator promises to faithfully and fairly determine the matter before the Panel.

              (e) Replacement.

              If an arbitrator becomes ineligible or otherwise unable to serve on the Panel, the Secretary shall (unless the parties request otherwise) appoint a replacement to the Panel. In the event an arbitrator is excused or recuses himself after the commencement of the hearing because a party failed to disclose information which may be grounds for objecting to the arbitrator, the party withholding the information shall be deemed to have waived his right to object to proceeding with the remaining two arbitrators. If a replacement is appointed after the commencement of the hearing, the Panel shall determine whether all or any part of any prior hearing sessions shall be repeated.

              (f) Ex Parte Contacts.

              No party to the arbitration, or a representative thereof, shall communicate with any Panel member regarding the arbitration, other than inquiries concerning the status thereof, except at the hearing or in writing on notice to the other parties.


              SECTION 5. TIME PERIOD FOR ARBITRATION.

              [Effective dates of amendments: February 18, 1992; May 1, 1994; June 7, 1996; June 23, 1997 and March 1, 2002.]

              No Arbitration Claim may be arbitrated under this Code unless an Arbitration Claim or notice of intent to arbitrate (see Sections 6(a) and (c)) is received by NFA within two years from the date when the party filing the Arbitration Claim knew or should have known of the act or transaction that is the subject of the controversy. Except as is provided in Sections 6(f) and (h) below, no counterclaim, cross-claim or third-party claim may be arbitrated under this Code unless it is asserted in a timely filed Answer in accordance with Section 6(e) below. NFA shall reject any claim that is not timely filed. If, in the course of any arbitration, the Panel determines that the requirements of this section have not been met as to a particular claim, the Panel shall thereupon terminate the arbitration of the claim without decision or award.


              SECTION 6. INITIATION OF ARBITRATION.

              [Effective dates of amendments: June 28, 1985; January 28, 1986; November 9, 1988; July 12, 1989; June 12, 1991; February 18, 1992; May 17, 1993; May 1, 1994; March 12, 1996; June 7, 1996; June 23, 1997; June 1, 1999; March 1, 2002; June 13, 2005; June 5, 2007; October 1, 2009; October 18, 2010; and January 15, 2014]

              An arbitration proceeding under this Code shall be initiated as follows:

              (a) Notice of Intent to Arbitrate.

              If the two-year time limit under Section 5 of this Code is close to expiring, a person wanting to file an Arbitration Claim may notify NFA, either in writing or orally, of such person's intent to arbitrate. NFA shall maintain a record of the receipt of each such notice and shall promptly provide such person with a copy of this Code and an Arbitration Claim form.

              (b) Arbitration Claim Pursuant to a Notice of Intent to Arbitrate.

              If a person who files a notice of intent to arbitrate decides to proceed with NFA arbitration, such person shall, within 35 days after the date NFA provided the person with a copy of the Code and an Arbitration Claim form under Section 6(a) above, serve a completed Arbitration Claim on NFA.

              (c) Arbitration Claim

              NFA shall promptly review each Arbitration Claim for completeness. Any Arbitration Claim which NFA deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed Arbitration Claim on NFA, together with any unpaid fee, within 20 days following service by NFA. NFA shall reject any Arbitration Claim which has not been timely filed, or for which the appropriate fee has not been paid.

              (d) Notice to Respondent.

                (1) NFA shall promptly serve a copy of the completed Arbitration Claim on each person named therein as a Respondent.

                (2) If a guaranteed IB is named in the Arbitration Claim as a Respondent, NFA shall promptly serve a copy of the completed Arbitration Claim on the Member FCM or RFED that guaranteed the IB during the time of the acts or transactions involved in the claim. That Member FCM or RFED may intervene in the arbitration proceeding if it chooses to.

              (e) Answer to an Arbitration Claim.

              A Respondent shall serve its Answer on NFA and concurrently serve a copy on the Claimant within the time period provided below. Any Member FCM or RFED served with the Arbitration Claim under Section 6(d)(2) above that wishes to intervene in the arbitration proceeding must serve an Answer and written notice of intervention on NFA and concurrently serve a copy on the Claimant within the time period provided below for filing the Answer. An allegation in the Arbitration Claim that is not denied in the Answer shall be deemed by the Panel to be admitted.

                (1) Claims of $50,000 or Less. Where the Arbitration Claim amount does not exceed $50,000, the Answer shall be served within 20 days following service of the Arbitration Claim by NFA.

                (2) Claims of more than $50,000 through $100,000. Where the Arbitration Claim amount exceeds $50,000 but is not more than $100,000, the Answer shall be served within 45 days following service of the Arbitration Claim by NFA. An arbitration service fee of $275.00 shall accompany each Answer. Any Answer which is not accompanied by the appropriate fee shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed Answer on NFA, together with any unpaid fee, within 20 days following service by NFA. NFA shall reject any Answer for which the appropriate fee has not been paid. Each Respondent who files an Answer but does not pay the service fee will have waived its right to an oral hearing and to otherwise participate in the proceeding. However, the Panel may, for good cause shown, accept the Answer and allow the Respondent to participate.

                (3) Claims of more than $100,000. Where the Arbitration Claim amount exceeds $100,000, the Answer shall be served within 45 days following service of the Arbitration Claim by NFA. An arbitration service fee of $675.00 shall accompany each Answer. Any Answer which is not accompanied by the appropriate fee shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed Answer on NFA, together with any unpaid fee, within 20 days following service by NFA. NFA shall reject any Answer for which the appropriate fee has not been paid. Each Respondent who files an Answer but does not pay the service fee will have waived its right to an oral hearing and to otherwise participate in the proceeding. However, the Panel may, for good cause shown, accept the Answer and allow the Respondent to participate. 

              (f) Counterclaim and Cross-claim.

              Any counterclaim or cross-claim under Section 2(a)(2) must be asserted in the Answer, unless the person against whom the counterclaim or cross-claim is asserted consents to a later assertion of the counterclaim or cross-claim. If any counterclaim or cross-claim is asserted, the party asserting the counterclaim or cross-claim shall promptly remit the appropriate fee to NFA. (See Sections 11 and 18.) Any counterclaim or cross-claim which NFA deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed counterclaim or cross-claim on NFA, together with any unpaid fee, within the time period provided below. NFA shall reject any counterclaim or cross-claim which has not been timely filed, or for which the appropriate fee has not been paid.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the completed counterclaim or cross-claim shall be served within 10 days following service of the incomplete counterclaim or cross-claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the completed counterclaim or cross-claim shall be served within 20 days following service of the incomplete counterclaim or cross-claim by NFA.

              (g) Reply to Counterclaim or Cross-claim.

              The person against whom the counterclaim or cross-claim is asserted shall serve its Reply to the counterclaim or cross-claim on NFA and concurrently serve a copy on the counterclaiming or cross-claiming Respondent within the time period provided below. Any allegation in the counterclaim or cross-claim that is not denied in the Reply shall be deemed by the Panel to be admitted.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the Reply shall be served within 10 days following service of the Answer, counterclaim or cross-claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the Reply shall be served within 35 days following service of the Answer, counterclaim or cross-claim by NFA.

              (h) Third-party Claim.

              Any third-party claim under Section 2(a)(2) must be asserted in the Answer, unless the third party consents to a later assertion of the claim. If the third party is not a Member or Associate, such person must agree or have agreed to submit to arbitration. If any third-party claim is asserted, the Respondent asserting the third-party claim shall promptly remit the appropriate fee to NFA. (See Sections 11 and 18 below.) Any third-party claim which NFA deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed third-party claim on NFA, together with any unpaid fee, within the time period provided below. NFA shall reject any third-party claim which has not been timely filed, or for which the appropriate fee has not been paid.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the completed third-party claim shall be served within 10 days following service of the incomplete third-party claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the completed third-party claim shall be served within 20 days following service of the incomplete third-party claim by NFA.

              (i) Notice to Third-party Respondent.

              NFA shall promptly serve a copy of the completed third-party claim on each person named therein as a Respondent, and a copy of any agreement to arbitrate.

              (j) Answer to Third-party Claim.

              A third-party Respondent shall serve its Answer on NFA and concurrently serve a copy on the third-party Claimant within the time period provided below. An allegation in the third-party claim that is not denied in the Answer shall be deemed by the Panel to be admitted.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the Answer shall be served within 20 days following service of the third-party claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the Answer shall be served within 45 days following service of the third-party claim by NFA.

              (k) Amendments to Claims.

              After the appointment of a Panel, no new or different claim may be filed except with the Panel's consent.

              (l) Late Answer, Reply or Notice of Intervention.

              NFA shall accept any Answer or Reply filed prior to the hearing. However, NFA or any party may present an objection to the Panel with regard to the timeliness of any filing. NFA will not accept a late notice of intervention unless the party filing the late notice explains in writing its reasons for the lateness and obtains the Panel's consent to file the late notice.

              (m) Consolidation and Joinder.

                (1) When Arbitration Claims involving common questions of fact or arising from the same act or transactions are received by the Secretary, the Secretary may, whether or not at the request of any party, order any or all of the proceedings to be consolidated for hearing in the interest of providing a fair, equitable and expeditious procedure and may take such action concerning the proceedings herein as may tend to avoid unnecessary or unreasonable delay.

                (2) A party may join multiple claims in a single Arbitration Claim involving common questions of fact or arising from the same act or transactions if the claims involve common questions of fact, arise from the same act or transactions, are filed by the same person against the same Respondents (even if the person filing the Arbitration Claim is acting in different capacities) or are filed on behalf of an individual and a corporation against the same Respondents if the individual is the sole shareholder of the corporation. The Secretary may, whether or not at the request of any party, order any or all joined claims to be separated in the interest of providing a fair, equitable or expeditious procedure or to avoid unnecessary or unreasonable delay.

              (n) Special Consolidation Procedures for Claims Involving Customer Segregated Funds and/or Customer Secured Amount Funds Losses.

              In the event of an FCM insolvency that results in customer segregated funds and/or customer secured amount funds losses in excess of $50 million based on the net liquidating value of customer accounts as of the close of business on the date of the bankruptcy, one or more groups of customers of the FCM may consolidate their claims for monetary losses by filing a single arbitration claim under the Code subject to the following additional provisions:

                (1) At the time of filing the consolidated claim, the consolidated group of claimants must indicate the claim is being filed under Section 6(n);

                (2) The consolidated group of claimants must be represented by an attorney(s) acting on behalf of the consolidated group, and individual claimants are not permitted to have their own counsel representing them in the arbitration;

                (3) The consolidated group of claimants may not proceed against any Respondent(s) that has filed a petition for bankruptcy under the U.S. Bankruptcy Code, absent bankruptcy court approval;

                (4) The consolidated group of claimants shall remit a filing fee of $20,000 and a hearing fee deposit of $30,000 to NFA at the time the consolidated claim is filed. Where the hearing fee deposit paid by the consolidated group of claimants is not sufficient to cover fees assessed to the consolidated group of claimants for pre-hearing motions, preliminary hearing requests and/or postponement requests (if any) and hearing sessions based on the standard, preset fee NFA pays to the arbitrators, NFA will assess and collect additional hearing fees from the consolidated group of claimants to cover the additional standard, preset fees to be paid to the arbitrators;

                (5) The relief requested by the consolidated group of claimants shall be limited to monetary damages equal to the net liquidating value of each individual claimant's account(s) as of the close of business on the day of the bankruptcy, but may also include a request for interest, costs and fees where appropriate under the Code;

                (6) Respondent(s) must serve the Answer and any other pleadings or documents on the attorney(s) representing the consolidated group of claimants and not the individual claimants;

                (7) Any pre-hearing motions or requests for preliminary hearing are subject to a fee of $675 assessed against the filing party. Fees assessed against the consolidated group of claimants will be applied against the initial hearing deposit. Fees assessed against the Respondent(s) are due at the time of filing;

                (8) Any postponement fee shall be assessed and remitted in accordance with Section 11(c) of the Code, except that if the consolidated group of claimants file the postponement request, the fee shall be assessed against the initial hearing fee deposit;

                (9) Site selection preferences are limited to Chicago or New York;

                (10) Any hearing fees collected from the consolidated group of claimants that are not paid to the arbitrators will be refunded to the consolidated group; and

                (11) Except as provided above, the consolidated claim shall otherwise be administered in accordance with the existing provisions of the Code.

              (o) Dismissal Without Prejudice.

              The Panel may, at the written request of a party or on its own motion, dismiss without prejudice any claim which it determines is not a proper subject for NFA arbitration.

              (p) Attestation.

              Any claim, answer, counterclaim, cross-claim, reply to counterclaim or cross-claim, third-party claim, or answer to third-party claim must include the following attestation: "The undersigned certifies that, to the best of his/her knowledge, information and belief, formed after a reasonable inquiry, the statements set forth in this pleading are true and correct."


              SECTION 7. RIGHT TO COUNSEL.

              [Effective dates of amendments: November 9, 1988; July 12, 1989; June 12, 1991; June 23, 1997; December 17, 1999; June 1, 2006; and January 15, 2014.]

              (a) Except as provided in Section 6(n), a party may be represented at any time throughout the arbitration proceeding, including a mediation proceeding, by an attorney-at-law licensed to practice law in the highest court of any state, by a family member or other person who is representing the party without compensation and who does not have an interest in the outcome of the proceeding, or by an officer, partner or employee of the party. The attorney or other representative shall serve timely notice in writing on NFA and the other parties of the name and address of any such representative. The Panel may bar from the proceeding any representative for dilatory, disruptive or contumacious conduct.

              (b) A representative of a party may withdraw upon submitting to NFA an affidavit that the party represented has actual knowledge of the withdrawal or that the representative has made a good faith effort to provide such notice.


              SECTION 8. PRE-HEARING.

              [Adopted effective June 28, 1985. Effective dates of amendments: July 12, 1989; June 12, 1991; May 1, 1994; March 12, 1996; June 23, 1997; June 1, 1999; March 1, 2002; June 1, 2006; October 1, 2009 and January 15, 2014.]

              (a) Exchange of Documents and Written Information.

                (1) The parties shall cooperate, without resort to issuance of subpoenas, in the voluntary exchange of material and relevant documents and written information which may serve to facilitate a fair, equitable and expeditious hearing.

                (2) When a claim is accepted by NFA and served on each person named as a Respondent, NFA shall identify, from a list approved by NFA's Board of Directors, documents to be automatically exchanged between the parties. The parties shall exchange those documents no later than 15 days after the last pleading is due.

                (3) All other requests for documents and written information shall be served as follows:

                  (i) Where the aggregate claim amount does not exceed $50,000, the requesting party shall serve its requests for documents and written information on the responding party no later than 20 days after the last pleading is due. The responding party shall serve the documents and written information, including written objections, no later than 20 days after the request is due.

                  (ii) Where the aggregate claim amount exceeds $50,000, the requesting party shall serve its request for documents and written information on the responding party no later than 30 days after the last pleading is due. The responding party shall serve the requesting party with the documents and written information, including written objections, no later than 30 days after the request is due.

                (4) Written requests to compel production of documents and written information must be served on NFA and all parties no later than 10 days after the written objections are due. Written responses to the request to compel must be served on the Secretary and all parties no later than 10 days after the request to compel was served.

                (5) A request to compel must include a written certification by the filing party or its representative. The certification must state that the filing party or its representative has made a good faith effort to resolve the matters forming the basis for the request through either a telephone conference or in-person meeting with the other party or its representative.

                (6) Unless the Panel directs otherwise, requests to compel will be decided on the written submission of the parties.

                (7) A request to compel that is not timely filed under Section 8(a)(4) above will not be allowed except for good cause shown as to why it was late.

                (8) Evidence that is otherwise discoverable or admissible in an arbitration proceeding shall not be rendered non-discoverable or inadmissible as a result of its use in connection with a mediation proceeding. However, documents and written information in the mediator's possession are not subject to discovery and may not be subpoenaed for use in the subsequent arbitration hearing.

              (b) Documents to be Introduced into Evidence.

                (1) Unless a Panel directs otherwise, each party shall serve on every other party all documents in such party's possession which the party intends to introduce into evidence at the hearing as part of its direct case and shall concurrently serve sufficient copies of the documents on NFA at least 10 days prior to the date assigned for an oral hearing.

                (2) At least 15 days before the date assigned for a summary proceeding to commence, each party shall serve on NFA sufficient copies of all documents in such party's possession which are to be submitted to the Panel as part of the party's case and shall concurrently serve copies on every other party. At least five days before the date assigned for a summary proceeding to commence, each party shall serve on NFA sufficient copies of all documents in such party's possession which are to be submitted to the Panel to rebut the documents previously served by another party and shall concurrently serve copies on every other party.

              (c) Hearing Plan.

              The parties shall cooperate with NFA in the formulation of a written hearing plan. A hearing plan is a written document that summarizes each claim, Answer and Reply; identifies any facts the parties have agreed to; identifies the factual and legal issues in dispute; and lists the witnesses and exhibits that will be presented at the hearing. The parties shall serve on NFA and all parties a joint hearing plan, or separate hearing plans if they cannot agree on a joint one, no later than 30 days before the oral hearing date, unless the Panel directs otherwise.

              (d) Failure to Comply.

              The failure of any party to comply with Sections 8(a) through 8(c) or any order of the Panel may be brought to the attention of the Panel by NFA or the party seeking such documents or information. The Panel may take such actions in regard to the failure as are just, including, among other things, the following:

                (1) finding that the matters regarding which the request was made or any other designated facts shall be taken to be established for the purpose of the action in accordance with the claim of the party making the request;

                (2) refusing to allow the nonresponsive party to support or oppose designated claims or defenses or prohibiting him from introducing designated matters in evidence;

                (3) striking out pleadings or portions thereof, staying further proceedings until the nonresponsive party complies with the request, dismissing the action or proceeding or any part thereof, or rendering an award by default against the nonresponsive party.

                (4) refusing to hear testimony of any witness or to accept any document into evidence if the witness or document was not listed in the hearing plan.

              (e) Other Pre-Hearing Motions.

                (1) Motions to dismiss for failing to state a claim will not be heard by the Panel. Other motions to dismiss must be included in a timely filed Answer or Reply. Motions for summary judgment may be raised at any time. Motions for directed verdict may be raised at the hearing.

                (2) Except as provided in Section 8(a)(4) above, a party has 10 days from the date a pre-hearing motion is received in which to serve a written response on NFA and all other parties. However, where a motion is received less than 20 days in advance of the date the hearing or summary proceeding is scheduled to commence, NFA may, in its discretion, require a written response within less than 10 days. No written replies to a party's response to a motion will be allowed except in the Panel's discretion.

                (3) Except as provided in Section 6(n), NFA shall assess a motion fee as follows:

                  (i) In cases involving one arbitrator, a party filing a motion shall include a $125 motion fee for each motion filed more than 80 days after the last pleading is due. This fee may be subsequently waived at the discretion of the arbitrator, or the arbitrator may assess the motion fee against the party causing the filing of the motion. However, this fee shall not apply to a request for a preliminary hearing under Section 9(a) or a request for a postponement under Section 11(c) below.

                  (ii) In cases involving three arbitrators, any party filing a motion shall include a $425 motion fee for each motion filed more than 100 days after the last pleading is due. This fee may be subsequently waived at the discretion of the arbitrators, or the arbitrators may assess the motion fee against the party causing the filing of the motion. However, this fee shall not apply to a request for a preliminary hearing under Section 9(a) or a request for a postponement under Section 11(c) below.

              (f) Pre-Hearing Decisions by the Arbitrators.

                (1) For cases that will be decided through a summary proceeding, the Panel will decide all motions as part of the summary review, except for those related to discovery or postponement requests.

                (2) With the consent of the other Panel members, one or more of the arbitrators may act on behalf of the Panel to decide any pre-hearing motions from the parties or to conduct any pre-hearing conference with the parties. However, the Panel may not postpone the hearing or impose sanctions, dismiss a party, or dismiss all or any portion of a claim without a majority decision.

              (g) Pre-Hearing Conference.

              For cases that will be decided through an oral hearing, NFA may schedule a pre-hearing conference with the Panel and the parties. The notice scheduling the pre-hearing conference will specify the issues to be covered at the conference, including identifying outstanding discovery disputes, setting deadlines for other motions and scheduling the hearing. The conference will be conducted by telephone within 30 days after the motion to compel due date, unless the Panel directs otherwise.

              (h) Depositions.

              The Panel may, upon the motion of a party, order evidence depositions for good cause shown.


              SECTION 9. HEARING.

              [Effective dates of amendments: November 24, 1982; December 30, 1983; June 28, 1985; January 28, 1986; November 9, 1988; July 12, 1989; June 12, 1991; February 18, 1992; December 1, 1992; May 1, 1994; June 23, 1997; May 1, 2001; March 1, 2002; June 1, 2006; October 15, 2007; April 1, 2008; October 1, 2009 and January 15, 2014.]

              (a) Preliminary Hearing.

              The Panel may, at the written request of a party or on its own motion, schedule a preliminary hearing in extraordinary circumstances. Such hearing may be conducted orally, by telephone conference, or by written submissions.

              (b) Place, Time and Notice of Hearing.

              Except as provided in Section 6(n), Section 8(g) or Paragraph (i) of this Section, the place and time of the hearing shall be determined in the sole discretion of the Secretary, who shall endeavor to accommodate, if possible, the preferences of all parties as indicated in a timely-filed pleading. Upon setting the initial hearing date, NFA shall serve notice on each party at least 45 days before the hearing of the date, time and place. NFA shall give reasonable notice of any rescheduled oral hearing date.

              (c) Failure to Prosecute or Defend.

              At the written request of any party or on its own motion, the Panel may review the procedural history of the proceeding and any written submissions and may find that a party has failed to prosecute or defend the proceeding. Any party found to have failed to prosecute or defend the proceeding will be deemed to have waived his right to an oral hearing.

              (d) Procedure.

                (1) Each party may appear personally at the hearing to testify and produce evidence.

                (2) Each party (or the party's representative) may present opening and closing arguments, and may examine any other party or witness at the hearing and any evidence produced at the hearing.

                (3) The Panel need not apply the technical rules of evidence.

                (4) Unless waived by the parties, the Panel shall cause a verbatim record to be made of the hearing, but no party shall be required to bear the costs of making the record unless the party requests a transcript, in which case a transcript must be furnished.

                (5) All testimony at the hearing shall be given under oath.

                (6) The Panel may allow stipulations and establish other procedures as appropriate to expedite the proceeding. The Panel may consider affidavits but shall give them such weight as it deems appropriate after considering objections to them.

                (7) The Panel may order Members and employees thereof, and Associates to testify and produce documentary evidence. The Panel may issue subpoenas to non-Members as authorized by law. The parties must submit all subpoena requests to the Panel and serve those requests in accordance with Section 16(b) below. Subpoenas issued by the Panel may be enforced in a court of competent jurisdiction.

                (8) The party requesting the appearance of a non-party witness shall bear all reasonable costs of such appearance. For purposes of this section, an employee or an Associate of any party shall be considered a party witness.

                (9) All conduct and statements, offers and promises, whether oral or written, made by the parties or their representatives in connection with a mediation proceeding shall be confidential and shall not be admissible for any purpose, including impeachment, in any pending or subsequent arbitration proceeding. The mediator may not be called as a witness in a pending or subsequent arbitration proceeding.

                (10) In all other respects, the hearing procedure shall be determined by the Panel. The Panel shall afford the parties every reasonable opportunity to present their case completely.

              (e) Extensions and Postponements.

              Extensions of time or postponements of the hearing may be granted by the Panel when the interests of justice so require, but a hearing in progress shall not be adjourned or interrupted except in compelling circumstances.

              (f) Failure to Comply.

              The failure of any party to appear at any hearing or any session thereof, or to comply with any notice, order, or procedure in connection therewith, may subject the party to such adverse action as the Panel deems appropriate, including the entry of an award or the dismissal of a claim.

              (g) Reopening the Record.

              The record may be reopened by the Panel on its own motion or on the motion of a party for good cause at any time prior to the Panel rendering its award. A motion to reopen the record shall stay automatically the time period in which the award shall be rendered.

              (h) Waiver of Defects.

              Where appropriate, the Panel may excuse any failure to comply with any provision of this section, or any Panel notice, order or procedure.

              (i) Summary Proceeding.

              The proceeding shall be conducted entirely through written submissions when:

                (1) the aggregate amount of the claims (exclusive of interest and costs) does not exceed $25,000, unless the Secretary or the Panel directs otherwise;

                (2) the aggregate amount of the claims (exclusive of interest and costs) is more than $25,000 but not more than $50,000, unless the Secretary or the Panel directs otherwise or one of the parties to the proceeding serves a written request for an oral hearing on NFA, accompanied by a fee of $675.00, no later than 30 days after the last pleading is due; or

                (3) the Panel has consented to the written agreement of the parties to waive the oral hearing. A written agreement is not required of any party which has waived its rights to an oral hearing under any other provision of this Code.


              SECTION 10. AWARD, SETTLEMENT AND WITHDRAWAL.

              [Effective dates of amendments: July 27, 1983; June 28, 1985; June 13, 1986; November 9, 1988; July 12, 1989; July 30, 1990; June 12, 1991; October 29, 1991; February 18, 1992; May 17, 1993; May 1, 1994; March 12, 1996; June 23, 1997; June 1, 1999; March 21, 2001; March 10, 2005; June 1, 2006; October 1, 2006; July 7, 2011 and January 15, 2014.]

              (a) Issuance of Award.

              The Panel shall notify NFA of its decision within 30 days after the record is closed. NFA shall then prepare a written award form, to be dated and signed by the Panel members. NFA shall promptly serve a copy of the award on each party or its representative. The award shall be that of the Panel majority.

              (b) Relief.

              Except as provided in Section 6(n), the award may grant or deny any of the monetary relief requested, and may include an assessment of interest, costs or fees (See Sections 11 and 12). A request for declaratory relief will only be heard by the arbitrators if the Respondent agrees to have the arbitrators hear the claim.

              (c) Finality.

              The Panel's award shall be final on the date thereof. The award may be modified by the Panel if a party submits a written request for modification which is received by NFA within 20 days from the date of service of the award on the parties, and the Panel deems modification necessary because:

                (1) there is an evident material miscalculation of figures or an evident material mistake in the description of any person, thing or property referred to in the award;

                (2) the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted; or

                (3) the award is imperfect in matter of form not affecting the merits of the controversy.

              NFA will not forward a modification request to the Panel unless it is based on one of the grounds listed above. The timely filing of a request for modification shall stay automatically the finality of any award until NFA rejects the request or the Panel either modifies the award or denies the request for modification.

              (d) Appeal.

              There shall be no right of appeal of the award.

              (e) Award Binding.

              All parties shall be bound by the award and any modification thereof.

              (f) Judgment.

              Judgment on the award may be entered in any court of competent jurisdiction.

              (g) Failure to Comply.

              (1) The President may, on 30 days written notice, summarily suspend a Member or Associate when the Member, or employee thereof, or Associate:

                (i) fails to comply with an award within 30 days from the date of service of the award by NFA or such other period as specified in the award unless

                  (A) a request to modify the award is pending under Section 10(c) or

                  (B) the Member, or employee thereof, or Associate who failed to comply has a pending application to vacate, modify or correct the award in a court of competent jurisdiction and has posted a bond with NFA equal to 150% of the amount of the award against that person or such lesser amount as NFA shall require in a particular case, but not less than 110% unless a satisfactory bond has been posted with the court; or

                (ii) fails to comply with a settlement agreement within 30 days after NFA terminates the arbitration proceeding pursuant to Section 10(h) or such other period as specified in the settlement agreement; or

                (iii) fails to pay any fee assessed within the time so ordered by the Panel.

              The suspension shall remain in effect until such award, settlement agreement, or order of the Panel has been satisfied.

              (2) The President may, on 30 days written notice, summarily bar from Membership or Associate Membership a former Member or Associate when that former Member, or employee thereof, or former Associate:

                (i) fails to comply with an award within 30 days from the date of the service of the award by NFA or such other period as specified in the award unless

                  (A) a request to modify the award is pending under Section 10(c) or

                  (B) the former Member or former Associate who failed to comply has a pending application to vacate, modify or correct the award in a court of competent jurisdiction and has posted a bond with NFA equal to 150% of the amount of the award against that person or such lesser amount as NFA shall require in a particular case, but not less than 110% unless a satisfactory bond has been posted with the court;

                (ii) fails to comply with a settlement agreement within 30 days after NFA terminates the arbitration proceeding pursuant to Section 10(h) or such other period as specified in the settlement agreement, or

                (iii) fails to pay any fee assessed within the time so ordered by the Panel.

              The bar shall remain in effect until such award, settlement agreement, or order of the Panel has been satisfied.

              (3) A Member which guaranteed an IB during the relevant time may, on 30 days written notice, be summarily suspended by the President if the guarantor fails to pay an award issued against the IB under Section 10(c) or a settlement agreement entered into by the IB under Section 10(h) within 30 days after the guarantor has received actual notice that the IB has failed to comply with the award or settlement agreement. The suspension shall be lifted if the award or settlement agreement is satisfied.

              (4) The President may, on 30 days written notice, summarily bar a former Member which guaranteed an IB during the relevant time if the guarantor fails to pay an award issued against the IB under Section 10(c) or a settlement agreement entered into by the IB under Section 10(h) within 30 days after the guarantor has received actual notice that the IB has failed to comply with the award or settlement agreement. The bar shall be lifted if the award or settlement agreement is satisfied.

              (5) In lieu of or in addition to suspending any Member or Associate for failing to comply with an award, settlement agreement or Panel order to pay a fee or monetary sanction, NFA may initiate disciplinary action under its Compliance Rules for the failure of any Member or employee thereof or Associate to comply with the award, settlement agreement or Panel's order.

              (h) Satisfaction of Demand.

              At any time during the course of an arbitration, a party may satisfy a claim by payment or settlement, including settlement through mediation. The arbitration proceeding will terminate upon receipt of written notice of satisfaction and withdrawal of the claim duly executed by the parties and submitted to NFA. If NFA is notified that the claim has been settled, but the notification is not in writing or is not duly executed by the parties, NFA shall send written notice to the parties that the arbitration proceeding will terminate within 20 days of service of such notice unless NFA receives written notice that the claim has not been settled.

              (i) Consent Award.

              If parties agree to satisfy a claim at any time during the arbitration, the Panel may, at the request of such parties, set forth the terms of the satisfied claim in a consent award.

              (j) Withdrawal of Claim.

                (1) At any time during the course of the arbitration, a party may withdraw a claim against any Respondent who has not filed an Answer. A written notice of withdrawal must be filed with NFA. The withdrawal will be without prejudice unless the notice states otherwise.

                (2) After a party has filed a pleading, a party may not withdraw a claim against that party unless the party consents. The notice and the consent must be in writing and filed with NFA. The withdrawal will be without prejudice unless the notice or the consent states otherwise.


              SECTION 11. ARBITRATION FEES.

              [Effective dates of amendments: June 28, 1985; December 8, 1987; November 9, 1988; July 12, 1989; February 18, 1992; May 1, 1994; December 12, 1995; June 23, 1997; February 1, 2000; May 1, 2001; March 1, 2002; October 1, 2009 and January 15, 2014.]

              (a) Filing and Hearing Fees.

              (1) Except as provided in Section 6(n) and Section 18 of this Code, each party filing a claim under this Code shall pay a filing and hearing fee based on the amount claimed, including punitive and treble damages but exclusive of interest and costs, as follows:

              Amount of Claim Filing Fee Hearing Fee
              $0.00 - $2,500.00 $50.00 $125.00
              $2,500.01 - $5,000.00 $100.00 $125.00
              $5,000.01 - $10,000.00 $150.00 $125.00
              $10,000.01 - $15,000.00 $175.00 $125.00
              $15,000.01 - $25,000.00 $200.00 $125.00
              $25,000.01 - $50,000.00 $300.00 $125.00
              $50,000.01 - $100,000.00 $550.00 plus 1%
              of excess over
              $50,000.00
              $275.00
              $100,000.01 - $150,000.00 $1050.00 plus 1%
              of excess over
              $100,000.00
              $1,275.00
              $150,000.01 - $500,000.00 $1,550.00 $2,550.00
              More than $500,000.00 $1,550.00 $5,100.00

              (2) Except as provided in Section 6(n), where the hearing fees paid by the parties is not enough to cover the standard preset fees to be paid by NFA to the arbitrators, NFA shall collect additional fees to cover the fees to be paid to the arbitrators. If a case requires more than four days of hearing, the hearing fees will be twice the standard preset fees, unless the arbitrators order the fees to remain at the standard amount.

              (3) NFA shall also collect additional hearing fees when:

                (i) a party requests a preliminary hearing under Section 9(a);

                (ii) a party requests an oral hearing under Section 9(i)(2); or

                (iii) all the parties make a written request for three arbitrators under Section 4(a)(1). However, where the sole arbitrator asks NFA to appoint two additional arbitrators, NFA shall assess the additional fees equally against the parties.

              (4) The arbitrators, in their discretion, may assess the entire fee against any party or may divide the fee among any or all parties. Hearing fees shall be paid to NFA in advance of the hearing sessions to which they apply.

              (b) Refunds.

                (1) A full refund of any filing and hearing fees paid under Section 11(a) above shall be made if, prior to the appointment of a Panel, a claim filed under Section 2(a) above is found to be not arbitrable or if the President declines to arbitrate a claim under Section 2(b) of this Code.

                (2) Except as provided in Section 6(n) with respect to the initial hearing fee paid by the consolidated group of claimants, if all claims have been settled or withdrawn and NFA receives notice of the settlement or withdrawal at least five days in advance of the first scheduled pre-hearing conference date, if one is scheduled, or at least 30 days in advance of the first scheduled preliminary hearing date or oral hearing date, if no pre-hearing conference is scheduled, a full refund of the hearing fees paid under Section 11(a) and the arbitration service fees paid under Section 6(e) shall be made to the party paying the fee.

                (3) Except as provided in Section 6(n) with respect to the initial hearing fee paid by the consolidated group of claimants, if all claims have been settled or withdrawn and NFA receives written notice of the settlement or withdrawal at least 15 days in advance of the summary proceeding start date or first scheduled oral hearing date or preliminary hearing date, the hearing fees paid under Section 11(a) and arbitration service fees paid under Section 6(e) shall be refunded to the party paying the fee in accordance with the schedule below.

                Amount of Claim

                $0.00 - $25,00.00
                $25,000.01 - $50,000.00
                $50,000.01 - $100,000.00
                $100,000.01 - $150,000.00
                $150,000.01 - $500,000.00
                More than $500,000.00

                Hearing Fee Refund

                $ 125.00
                $ 125.00
                $ 125.00
                $ 925.00
                $ 2,200.00
                $ 4,750.00

                Service Fee Refund

                N/A
                N/A
                $ 125.00
                $ 325.00
                $ 325.00
                $ 325.00

               

               

               

               

               

              (c) Postponement Fees.

              Each party causing an adjournment or postponement of any scheduled oral hearing shall pay to NFA a postponement fee of $250 for the first postponement request by that party, $500 for the second request by that party, and $1,000 for any subsequent request by that party. This fee may be waived at the discretion of the arbitrators. The arbitrators also may assess reasonable and necessary expenses incurred by the parties and their witnesses, including reasonable attorneys' fees, as a result of a postponement. No fee shall be assessed if an arbitrator becomes ineligible or otherwise unable to serve, or if a hearing extends over the expected time period.


              SECTION 12. ARBITRATION COSTS.

              [Effective dates of amendments: June 28, 1985; November 9, 1988; July 12, 1989; February 18, 1992; May 1, 1994 and March 12, 1996.]

              Costs which may be included in an award shall normally be limited to the costs of any transcript which a party may request (See Section 9(d)(4)). A Panel may, however, assess against a party any one or more of the following other costs, upon a finding that such party's claim or defense was frivolous or was made in bad faith, or that the party engaged in willful acts of bad faith during the arbitration: Reasonable and necessary expenses incurred by (a) the arbitrators or (b) any other party or witness, including reasonable attorneys' fees. The Panel may also award attorneys' fees provided that a statutory or contractual basis exists for awarding such fees. Requests for attorneys' fees and costs incurred in the arbitration proceeding must be raised in the proceeding or they are waived.


              SECTION 13. NON-WAIVER OF NFA RIGHTS.

              [Effective dates of amendments: June 28, 1985.]

              The submission of a matter to arbitration under this Code shall not affect any right of NFA regarding the matter, including the right to initiate a disciplinary proceeding.


              SECTION 14. MEDIATION.

              [Adopted effective June 12, 1991. Effective dates of amendments: March 21, 2001]

              NFA may, in its discretion, notify the parties of the option to proceed to mediation.


              SECTION 15. DISPUTES NOT COVERED UNDER THIS CODE.

              [Adopted effective June 12, 1989. Effective dates of amendments: October 29, 1990.]

              Pursuant to such rules as may be approved by the Board of Directors, NFA may provide an arbitration forum for the resolution of futures-related disputes not covered under this Code.


              SECTION 16. MISCELLANEOUS.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994; June 23, 1997; March 21, 2001 March 1, 2002.]

              (a) Computation of Time.

                (1) Except as otherwise provided in this Code, service shall be deemed to occur on the earlier of the date that the documents are faxed (as evidenced by affidavit of service), e-mailed (as evidenced by affidavit of service), postal mailed, (as evidenced by postmark or affidavit of service), or the date personally delivered (as evidenced by affidavit of service).

                (2) The counting of days shall include all calendar days. Should a due date fall on a weekend or legal holiday such due date will be computed as the next business day on which mail is delivered.

              (b) Service of Process.

              Unless otherwise indicated, service may be accomplished by hand delivery, or by first class or certified mail, or by use of a generally recognized overnight delivery service to the party's last known business or home address on record with NFA. Documents may also be served by facsimile or electronic mail on NFA and any party who has consented to service by that method. All documents which are served on NFA shall be concurrently served on each party who has filed a pleading using methods designed to ensure that NFA and all parties will receive the documents on the same day. Service on a party's representative shall be service on the party.

              (c) Address of Record.

              A party shall promptly notify NFA of any change in the party's address or addresses, including the party's e-mail address or facsimile number, or the address of the party's representative on record with NFA.


              SECTION 17. AGREEMENTS CONFLICTING WITH THE CODE.

              [Adopted effective May 17, 1993.]

              This Code shall supersede any provision in an agreement entered into between the parties, either before or after a dispute arises, if the provision in the agreement contradicts or limits the Code or imposes additional obligations on NFA or the arbitrators. However, in the Secretary's discretion, the provision may be applied to NFA arbitration if the agreement names NFA as the arbitration forum or the parties consent in writing to apply the provision to NFA arbitration.


              SECTION 18. APPLICABILITY OF MEMBER ARBITRATION RULES.

              [Adopted effective March 24, 1994. Effective dates of amendments: December 17, 1999]

              This Code shall govern any cross-claim or third-party claim filed by a Member or Associate against another Member or Associate under this Code, except that Sections 2(a) and (b) of the Member Arbitration Rules shall apply to cross-claims or third-party claims and Section 11(a) of the Member Arbitration Rules shall apply to third-party claim.


              SECTION 19. NFA'S AUTHORITY TO INTERPRET THE CODE.

              [Adopted effective June 1, 1999.]

              NFA has the authority to interpret the provisions of this Code.


              SECTION 20. OTHER LEGAL PROCEEDINGS

              [Adopted effective October 7, 2010; and September 19, 2016.]

              During an arbitration proceeding filed by a customer that is not an eligible contract participant as defined in Section 1a(18) of the Act, no party to the arbitration may institute any suit, legal action, or proceeding outside of the arbitration proceeding against any other party that concerns or would resolve any of the matters raised in the arbitration.


              Member Arbitration Rules


              SECTION 1. DEFINITIONS.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994; March 1, 2002; September 9, 2002 and June 5, 2007.]

              As used in these Rules:

              (a) "Aggregate Claim" - means an Arbitration Claim plus any counterclaim, cross-claim and third-party claim filed in the same matter under these Rules.

              (b) "Arbitration Claim" - means a claim filed by a person instituting the Arbitration proceeding.

              (c) "Associate" - means a person who is registered with NFA as an Associate or was so registered when the acts or transactions that are the subject of the dispute occurred. (Under NFA Bylaws every person who is associated with a Member within the meaning of the term "associated person" as used in Section 4k of the Commodity Exchange Act, and who is required to be registered as such with the Commission, must register with NFA as an Associate.)

              (d) "Claim" - means an Arbitration Claim, counterclaim, cross-claim or third-party claim filed under these Rules.

              (e) "Claimant" - means a person making a proper and timely claim under these Rules.

              (f) "Commission" - means the Commodity Futures Trading Commission.

              (g) "Contract Market" - means an exchange designated by the Commission as a contract market in one or more commodities.

              (h) "Cross-claim" - means a claim filed by one Respondent against a co-Respondent.

              (i) "Hearings" - includes both oral hearing and summary proceedings, unless otherwise specified.

              (j) "Member" - means a Member of NFA other than a contract market or a person that was a Member (other than a contract market) at the time the acts or transactions that are the subject of the dispute occurred.

              (k) "NFA" - means National Futures Association.

              (l) "Panel" - means the arbitration panel selected pursuant to Section 3 of these Rules.

              (m) "Person" - includes individuals, corporations, partnerships, trusts, associations and other entities.

              (n) "Pleading" - means an Arbitration Claim, counterclaim, cross-claim, third-party claim, Answer or Reply filed under these Rules.

              (o) "President" - means the President of NFA.

              (p) "Respondent" - means a person against whom a claim is asserted under these Rules.

              (q) "Secretary" - means the Secretary of NFA.

              (r) "Self-regulatory organization" - means a contract market, a registered national securities exchange, or a registered national securities association.

              (s) "Third-party Claim" - means a claim filed by a Respondent against a person not a party to the action.


              SECTION 2. ARBITRABLE DISPUTES.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994; December 12, 1995; September 1, 1999 and March 1, 2002.]

              (a) Claims between Members.
              Except as provided in Sections 4 and 5 of these Rules with respect to timeliness requirements, disputes between and among Members shall be arbitrated under these Rules unless:

                (1) the parties, by valid and binding agreement, have committed themselves to the resolution of such dispute in a forum other than NFA;

                (2) the parties to such dispute are all required by the rules of another self-regulatory organization to submit the controversy to the settlement procedures of that self-regulatory organization;

                (3) all parties to the dispute are members of a contract market which has jurisdiction over the dispute; or

                (4) one of the parties to the dispute is a party to a dispute pending in another forum and files a cross-claim or third-party claim in that forum. The cross-claim or third-party claim must arise out of an act or transaction that is the subject of the claim pending in that forum.

              (b) Claims between Members and Associates.
              Except as provided in Sections 4 and 5 of these Rules with respect to timeliness requirements, disputes between Members and Associates and between Associates shall be arbitrated under these Rules, at the election of the person filing the claim, unless:

                (1) the parties, by valid and binding agreement, have committed themselves to the resolution of such dispute in a forum other than NFA;

                (2) the parties to such dispute are all required by the rules of another self-regulatory organization to submit the controversy to the settlement procedures of that self-regulatory organization; or

                (3) all parties to the dispute are members of a contract market which has jurisdiction over the dispute.

              Once a claim is filed, arbitration is mandatory for the Member or Associate the claim is against.

              (c) Counterclaims, Cross-claims and Third-party Claims.
              Except as provided in Sections 4 and 5 of these Rules with respect to timeliness requirements, a counterclaim, cross-claim or third-party claim must be asserted in an arbitration brought under paragraph (a) above and may be asserted in an arbitration brought under paragraph (b) above if the counterclaim, cross-claim or third-party claim arises out of an act or transaction that is the subject of the Arbitration Claim.


              SECTION 3. ARBITRATION PANEL.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994; June 23, 1997; September 1, 1999; May 1, 2001 and October 1, 2009.]

              (a) Appointment of Panel.

              Except as provided under Section 7(e) of the Rules, NFA shall conduct all arbitration proceedings under these Rules before an arbitration Panel consisting of the following:

              1. Where the aggregate claim amount does not exceed $100,000, NFA shall appoint one arbitrator. However, if the aggregate amount of the claim exceeds $50,000 but is not more than $100,000, NFA shall appoint three arbitrators if all parties serve a written request on NFA for three arbitrators by no later than 30 days after the last pleading is due or the sole arbitrator asks NFA to appoint two additional arbitrators.

              2. Where the aggregate claim amount exceeds $100,000, NFA shall appoint three arbitrators.

              All arbitration Panels shall be appointed by the Secretary and consist of individuals who are NFA Members or individuals connected therewith (one such Member or individual designated as Panel Chairperson).

              (b) Disclosures Required.

              Prior to being appointed to the Panel, each arbitrator under consideration shall disclose to NFA any circumstances that might prevent the arbitrator from acting impartially.

              (c) Appointment of Panel; Disclosure and Challenge.

              The Secretary shall thereupon appoint, pursuant to Section 3(a), an arbitration Panel to resolve the dispute. No arbitrator shall have acted as the mediator in the same dispute. NFA shall promptly notify the parties of each arbitrator's name, business affiliations, and other relevant information. Any objection of a party to such appointment shall be specific and for cause and submitted to NFA in written form. Each party or their representative shall disclose to NFA any circumstances likely to affect an arbitrator's impartiality, including any bias or financial interest in the result of the arbitration or any past or present relationship with the arbitrator. Any party who fails to disclose such information shall be deemed to have waived any objection to that arbitrator based on such information. Each arbitrator appointed shall disclose to NFA any circumstances likely to affect impartiality, including any bias or any financial interest in the result of the arbitration or any past or present relationship with the parties or their representatives. Upon receipt of such information from an arbitrator or other source, NFA shall communicate such information to the parties, and if NFA deems it appropriate to do so, to the Panel and others. Thereafter, NFA shall determine whether the arbitrator should be disqualified and shall inform the parties of the decision, which shall be conclusive.

              (d) Arbitrator's Oath.

              Before proceeding with the hearing, each arbitrator shall execute an oath whereby the arbitrator promises to faithfully and fairly determine the matter before the Panel.

              (e) Replacement.

              If an arbitrator become ineligible or otherwise unable to serve on the Panel, the Secretary shall (unless the parties request otherwise) appoint a replacement to the Panel. In the event an arbitrator is excused or recuses himself after the commencement of the hearing because a party failed to disclose information which may be grounds for objecting to the arbitrator, the party withholding the information shall be deemed to have waived his right to object to proceeding with the remaining two arbitrators. If a replacement is appointed after the commencement of the hearing, the Panel shall determine whether all or any part of any prior hearing sessions shall be repeated.

              (f) Ex Parte Contacts.

              No party to the arbitration, or any representative thereof, shall communicate with any Panel member regarding the arbitration, other than inquiries concerning the status thereof, except at the oral hearing or in writing on notice to the other parties.


              SECTION 4. TIME PERIOD FOR ARBITRATION.

              [Adopted effective February 18, 1992. Effective dates of amendments: March 24, 1994; June 7, 1996; June 23, 1997; March 1, 2002 and December 15, 2003.]

              No Arbitration Claim may be arbitrated under these Rules unless an Arbitration Claim or notice of intent to arbitrate (See Sections 5(a) and (c) below) is received by NFA within two years from the date when the party filing the Arbitration Claim knew or should have known of the act or transaction that is the subject of the controversy. No counterclaim, cross-claim or third-party claim may be arbitrated under these Rules unless it is received by NFA within two years from the date when the party asserting the counterclaim, cross-claim or third-party claim knew or should have known of the act or transaction that is the subject of the counterclaim, cross-claim or third-party claim or it is served on NFA with a timely filed Answer, whichever is later. NFA shall reject any claim that is not timely filed. If, in the course of any arbitration, the Panel determines that the requirements of this section have not been met as to a particular claim, the Panel shall thereupon terminate the arbitration of the claim without decision or award.


              SECTION 5. INITIATION OF ARBITRATION.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994; March 12, 1996; June 7, 1996; June 23, 1997; June 1, 1999; March 1, 2002; December 15, 2003; June 13, 2005; June 5, 2007; and October 18, 2010.]

              An arbitration proceeding under these Rules shall be initiated as follows:

              (a) Notice of Intent to Arbitrate.

              If the two-year time limit under Section 4 of these Rules is close to expiring, a person wanting to file an Arbitration Claim may notify NFA, either in writing or orally, of such person's intent to arbitrate. NFA shall maintain a record of the receipt of each such notice and shall promptly provide such person with a copy of these Rules and an Arbitration Claim form.

              (b) Arbitration Claim Pursuant to a Notice of Intent to Arbitrate.

              If a person who files a notice of intent to arbitrate decides to proceed with NFA arbitration, such person shall, within 35 days after the date NFA provided the person with a copy of the Rules and an Arbitration Claim form under Section 5(a) above, serve a completed Arbitration Claim on NFA.

              (c) Arbitration Claim.

              NFA shall promptly review each Arbitration Claim for completeness. Any Arbitration Claim which NFA deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed Arbitration Claim, together with any unpaid fee, within 20 days following service by NFA. NFA shall reject any Arbitration Claim which has not been timely filed, or for which the appropriate fee has not been paid.

              (d) Notice to Respondent.

              (1) NFA shall promptly serve a copy of the completed Arbitration Claim on each person named therein as a Respondent.

              (2) If a guarantee IB is named in the Arbitration Claim as a Respondent, NFA shall promptly serve a copy of the completed Arbitration Claim on the Member FCM or RFED that guaranteed the IB during the time of the acts and transactions involved in the claim. That Member FCM or RFED may intervene in the arbitration proceeding if it chooses to.

              (e) Answer to an Arbitration Claim.

              A Respondent shall serve its Answer on and concurrently serve a copy on the Claimant within the time period provided below. Any Member FCM or RFED served with the Arbitration Claim under Section 5(d)(2) above that wishes to intervene in the arbitration proceeding must serve an Answer and written notice of intervention on NFA and concurrently serve a on the Claimant within the time period provided below for filing the Answer. An allegation in the Arbitration Claim that is not denied in the Answer shall be deemed by the Panel to be admitted.

                (1) Claims of $50,000 or Less. Where the Arbitration Claim amount does not exceed $50,000, the Answer shall be served within 20 days following service of the Arbitration Claim by NFA.

                (2) Claims of more than $50,000 through $100,000. Where the Arbitration Claim amount exceeds $50,000 but is not more than $100,000, the Answer shall be served within 45 days following service of the Arbitration Claim by NFA. An arbitration service fee of $275.00 shall accompany each Answer. Any Answer which is not accompanied by the appropriate fee shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed Answer on NFA, together with any unpaid fee, within 20 days following service by NFA. NFA shall reject any Answer for which the appropriate fee has not been paid. Each Respondent who files an Answer but does not pay the service fee will have waived its right to an oral hearing and to otherwise participate in the proceeding. However, the Panel may, for good cause shown, accept the Answer and allow the Respondent to participate.

                (3) Claims of more than $100,000. Where the Arbitration Claim amount exceeds $100,000, the Answer shall be served within 45 days following service of the Arbitration Claim by NFA. An arbitration service fee of $675.00 shall accompany each Answer. Any Answer which is not accompanied by the appropriate fee shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed Answer on NFA, together with any unpaid fee, within 20 days following service by NFA. NFA shall reject any Answer for which the appropriate fee has not been paid. Each Respondent who files an Answer but does not pay the service fee will have waived its right to an oral hearing and to otherwise participate in the proceeding. However, the Panel may, for good cause shown, accept the Answer and allow the Respondent to participate.

              (f) Counterclaim and Cross-claim.

              If any counterclaim or cross-claim is asserted, the party asserting the counterclaim or cross-claim shall promptly remit the appropriate fee to NFA. (See Section 11 below.) Any counterclaim or cross-claim which NFA deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed counterclaim or cross claim on NFA, together with any unpaid fee, within the time period provided below. NFA shall reject any counterclaim or cross-claim which has not been timely filed, or for which the appropriate fee has not been paid.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the completed counterclaim or cross-claim shall be served within 10 days following service by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the completed counterclaim or cross-claim shall be served within 20 days following service by NFA.

              (g) Reply to Counterclaim or Cross-claim.

              The person against whom the counterclaim or cross-claim is asserted shall serve its Reply to the counterclaim or cross-claim on NFA, and concurrently serve a copy on the counterclaiming or cross-claiming Respondent within the time period provided below. Any allegation in the counterclaim or cross-claim that is not denied in the Reply shall be deemed by the Panel to be admitted.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the Reply shall be served within 10 days from the date of service of the Answer, counterclaim or cross-claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the Reply shall be served within 35 days from the date of service of the Answer, counterclaim or cross-claim by NFA.

              (h) Third-party Claim.

              A Respondent may file a third-party claim against a Member or Associate under these Rules. If any third-party claim is asserted, the Respondent asserting the third-party claim shall promptly remit the appropriate fee to NFA. (See Section 11 below.) Any third-party claim, which NFA deems to be incomplete, or which is not accompanied by the appropriate fee, shall be returned to the filing party by NFA. In that event, the filing party shall serve a completed third party claim on NFA, together with any unpaid fee, within the time provided below. NFA shall reject any third-party claim which has not been timely filed, or for which the appropriate fee has not been paid.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the completed third-party claim shall be served within 10 days following service of the incomplete third-party claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the completed third-party claim shall be served within 20 days following service of the incomplete third-party claim by NFA.

              (i) Notice to Third-party Respondent.

              NFA shall promptly serve a copy of the completed third-party claim on each person named therein as a Respondent, and a copy of any agreement to arbitrate.

              (j) Answer to Third-party Claim.

              A third-party Respondent shall serve its Answer on NFA and concurrently serve a copy on the third-party Claimant within the time period provided below. An allegation in the third-party claim that is not denied in the Answer shall be deemed by the Panel to be admitted.

                (1) Claims of $50,000 or Less. Where the aggregate claim amount does not exceed $50,000, the Answer shall be served within 20 days following service of the third-party claim by NFA.

                (2) Claims of more than $50,000. Where the aggregate claim amount exceeds $50,000, the Answer shall be served within 45 days following service of the third-party claim by NFA.

              (k) Amendments to Claims.

              After the appointment of a Panel, no new or different claim may be filed except with the Panel's consent.

              (l) Late Answer, Reply or Notice of Intervention.

              NFA shall accept any Answer or Reply filed prior to the hearing. However, NFA or any party may present an objection to the Panel with regard to the timeliness of any filing. NFA will not accept a late notice of intervention unless the party filing the late notice explains in writing its reasons for the lateness and obtains the Panel's consent to file the late notice.

              (m) Consolidation and Joinder.

                (1) When Arbitration Claims involving common questions of fact or arising from the same act or transaction are received by the Secretary, the Secretary may, whether or not at the request of any party, order any or all of the proceedings to be consolidated for hearing in the interest of providing a fair, equitable and expeditious procedure and may take such action concerning the proceedings herein as may tend to avoid unnecessary or unreasonable delay.

                (2) A party may join multiple claims in a single Arbitration Claim if the claims involve common questions of fact, arise from the same act or transactions, are filed by the same person against the same Respondents (even if the person filing the Arbitration Claim is acting in different capacities) or are filed on behalf of an individual and a corporation against the same Respondents if the individual is the sole shareholder of the corporation. The Secretary may, whether or not at the request of any party, order any or all joined claims to be separated in the interest of providing a fair, equitable or expeditious procedure or to avoid unnecessary or unreasonable delay.

              (n) Attestation.

              Any claim, answer, counterclaim, cross-claim, reply to counterclaim or cross-claim, third-party claim, or answer to third-party claim must include the following attestation: "The undersigned certifies that, to the best of his/her knowledge, information and belief, formed after a reasonable inquiry, the statements set forth in this pleading are true and correct."


              SECTION 6. RIGHT TO COUNSEL.

              [Adopted effective February 18, 1992. Effective dates of amendments: June 23, 1997; December 17, 1999; and June 1, 2006.]

              (a) A party may be represented at any time throughout the arbitration proceeding, including a mediation proceeding, by an attorney-at-law licensed to practice law in the highest court of any state, by a family member or other person who is representing the party without compensation and who does not have an interest in the outcome of the proceeding, or by an officer, partner or employee of the party. The attorney or other representative shall serve timely notice in writing on NFA and the other parties of the name and address of any such representative. The Panel may bar from the proceeding any representative for dilatory, disruptive or contumacious conduct.

              (b) A representative of a party may withdraw upon submitting to NFA an affidavit that the party represented has actual knowledge of the withdrawal or that the representative has made a good faith effort to provide such notice.


              SECTION 7. PRE-HEARING.

              [Adopted effective February 18, 1992. Effective dates of amendments: March 24, 1994; March 12, 1996; June 23, 1997; June 1, 1999; September 1, 1999; March 1, 2002; and June 1, 2006.]

              (a) Exchange of Documents and Written Information.

                (1) The parties shall cooperate, without resort to issuance of subpoenas, in the voluntary exchange of material and relevant documents and written information which may serve to facilitate a fair, equitable and expeditious hearing.

                (2) When a claim is accepted by NFA and served on each person named as a Respondent, NFA shall identify, from a list approved by NFA's Board of Directors, documents to be automatically exchanged between the parties. The parties shall exchange those documents no later than 15 days after the last pleading is due.

                       (3) All other requests for documents and written information shall be served as follows:

                  (i) Where the aggregate claim amount does not exceed $50,000, the requesting party shall serve its requests for documents and written information on the responding party no later than 20 days after the last pleading is due. The responding party shall serve the documents and written information, including written objections, no later than 20 days after the request is due.

                  (ii) Where the aggregate claim amount exceeds $50,000, the requesting party shall serve its request for documents and written information on the responding party by the requesting party no later than 30 days after the last pleading is due. The responding party shall serve the requesting party with the documents and written information, including written objections, no later than 30 days after the request is due.

                (4) Written requests to compel production of documents and written information must be served on NFA and all parties no later than 10 days after the written objections are due. Written responses to the request to compel must be served on the Secretary and all parties no later than 10 days after the request to compel was served.

                (5) A request to compel must include a written certification by the filing party or its representative. The certification must state that the filing party or its representative has made a good faith effort to resolve the matters forming the basis for the request through either a telephone conference or in-person meeting with the other party or its representative.

                (6) Unless the Panel directs otherwise, requests to compel will be decided on the written submissions of the parties.

                (7) A request to compel that is not timely filed under Section 7(a)(4) above will not be allowed except for good cause shown as to why it was late.

                (8) Evidence that is otherwise discoverable or admissible in an arbitration proceeding shall not be rendered non-discoverable or inadmissible as a result of its use in connection with a mediation proceeding. However, documents and written information in the mediator's possession are not subject to discovery and may not be subpoenaed for use in the subsequent arbitration hearing.

              (b) Documents to be Introduced into Evidence.

                (1) Unless the Panel directs otherwise, each party shall serve on every other party all documents in such party's possession which the party intends to introduce into evidence at the hearing as part of its direct case and shall concurrently serve sufficient copies of the documents on NFA at least 10 days prior to the date assigned for an oral hearing.

                (2) At least 15 days before the date assigned for a summary proceeding to commence, each party shall serve on NFA sufficient copies of all documents in such party's possession which are to be submitted to the Panel as part of the party's case and shall concurrently serve copies on every other party. At least five days before the date assigned for a summary proceeding to commence, each party shall serve on NFA sufficient copies of all documents in such party's possession which are to be submitted to the Panel to rebut the documents previously served by another party and shall concurrently serve copies on every other party.

              (c) Hearing Plan.

              The parties shall cooperate with NFA in the formulation of a written hearing plan. A hearing plan is a written document that summarizes each claim, Answer and Reply; identifies any facts the parties have agreed to; identifies the factual and legal issues in dispute; and lists the witnesses and exhibits that will be presented at the hearing. The parties shall serve on NFA and all parties a joint hearing plan, or separate hearing plans if they cannot agree on a joint one, no later than 30 days before the oral hearing date, unless the Panel directs otherwise.

              (d) Failure to Comply.

              The failure of any party to comply with Sections 7(a) through 7(c) or any order of the Panel may be brought to the attention of the Panel by NFA or the party seeking such documents or information. The Panel may take such actions in regard to the failure as are just, including, among other things, the following:

                (1) finding that the matters regarding which the request was made or any other designated facts shall be taken to be established for the purpose of the action in accordance with the claim of the party making the request;

                (2) refusing to allow the nonresponsive party to support or oppose designated claims or defenses or prohibiting him from introducing designated matters in evidence; or

                (3) striking out pleadings or portions thereof, staying further proceedings until the nonresponsive party complies with the request, dismissing the action or proceeding or any part thereof, or rendering an award by default against the nonresponsive party; or

                (4) refusing to hear the testimony of any witness or to accept any document into evidence if the witness or document was not listed in the hearing plan.

              (e) Motions for Emergency Relief.

                (1) A motion for emergency relief may be filed with an Arbitration Claim or at any time after a Demand is filed. The motion should include a statement explaining why emergency relief is needed and indicate the party or parties against whom the relief is sought. The party filing the motion shall pay a non-refundable fee of $500 and a hearing fee of $150 when filing the motion.

                (2) The party filing the motion shall concurrently serve a copy of the motion on the party against whom relief is sought. NFA shall schedule a hearing on the motion no later than five business days after the motion is received by NFA. A party against whom relief is sought may serve a written response on NFA and the other party at or before the hearing. Service under this section must be accomplished by hand delivery or by use of a generally recognized overnight delivery service.

                (3) One arbitrator will decide a motion for emergency relief unless NFA or the arbitrator directs otherwise. The arbitrator or arbitrators deciding the motion for emergency relief may be different from the arbitrator or arbitrators who are assigned to hear the Arbitration Claim.

                (4) When the hearing fee paid under Section 7(e)(1) above is not enough to cover the standard preset hearing fees to be paid by NFA to the arbitrator or arbitrators for the time spent hearing the motion, NFA shall collect additional fees to cover the fees to be paid to the arbitrator or arbitrators.

                (5) Any order granting emergency relief shall remain in effect until NFA serves the award under Section 10 of these Rules unless the order directs otherwise. The arbitrator or arbitrators may modify the order for good cause shown.

                (6) If an order is issued granting emergency relief, the arbitrator or arbitrators may expedite the hearing by setting deadlines for filing pleadings, conducting discovery, exchanging exhibits, preparing the hearing plan, and scheduling the hearing that are shorter than those established under the Rules.

              (f) Other Pre-Hearing Motions.

                (1) Motions to dismiss for failing to state a claim will not be heard by the Panel. Other motions to dismiss must be included in a timely filed Answer or Reply. Motions for summary judgment may be raised at any time. Motions for directed verdict may be raised at the hearing.

                (2) Except as provided in Section 7(a)(4) and Section 7(e) above, a party has 10 days from the date a pre-hearing motion is received in which to serve a written response on NFA and all other parties. However, where a motion is received less than 20 days in advance of the date the hearing or summary proceeding is scheduled to commence, NFA may, in its discretion, require a written response within less than 10 days. No written replies to a party's response to a motion will be allowed except in the Panel's discretion.

                (3) NFA shall assess a motion fee as follows:

                  (i) In cases involving one arbitrator, a party filing a motion shall include a $125 motion fee for each motion filed more than 80 days after the last pleading is due. This fee may be subsequently waived at the discretion of the arbitrator, or the arbitrator may assess the motion fee against the party causing the filing of the motion. However, this fee shall not apply to a request for a preliminary hearing under Section 9(a) or a request for a postponement under Section 11(c) below.

                  (ii) In cases involving three arbitrators, any party filing a motion shall include a $425 motion fee for each motion filed more than 100 days after the last pleading is due. This fee may be subsequently waived at the discretion of the arbitrators, or the arbitrators may assess the motion fee against the party causing the filing of the motion. However, this fee shall not apply to a request for a preliminary hearing under Section 9(a) or a request for a postponement under Section 11(c) below.

              (g) Pre-Hearing Decisions by the Arbitrators.

              (1) For cases that will be decided through a summary proceeding, the Panel will decide all motions as part of the summary review, except for those related to discovery or postponement requests.

              (2) With the consent of the other Panel members, one or more of the arbitrators may act on behalf of the Panel to decide any pre-hearing motions from the parties to conduct any pre-hearing conference with the parties. However, the Panel may not postpone the hearing or impose sanctions, dismiss a party, or dismiss all or any portion of a claim without a majority decision.

              (h) Pre-Hearing Conference.

              For cases that will be decided through an oral hearing, NFA may schedule a pre-hearing conference with the Panel and the parties. The notice scheduling the pre-hearing conference will specify the issues to be covered at the conference, including identifying outstanding discovery disputes, setting deadlines for other motions and scheduling the hearing. The conference will be conducted by telephone within 30 days after the motion to compel due date, unless the Panel directs otherwise.

              (i) Depositions.

              The Panel may, upon the motion of a party, order evidence depositions for good cause shown.


              SECTION 8. DISMISSAL WITHOUT PREJUDICE.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994.]

              The Panel may, at the written request of a party or on its own motion, dismiss without prejudice any claim which it determines is not a proper subject for NFA arbitration.


              SECTION 9. HEARING.

              [Adopted effective February 18, 1992. Effective dates of amendments: December 1, 1992; May 1, 1994; June 23, 1997; May 1, 2001; March 1, 2002; June 1, 2006; October 15, 2007 and October 1, 2009.]

              (a) Preliminary Hearing.

              The Panel may, at the written request of a party or on its own motion, schedule a preliminary hearing in extraordinary circumstances. Such hearing may be conducted orally, by telephone conference, or by written submissions.

              (b) Place, Time and Notice of Hearing.

              Except as provided in Section 7(h) or Paragraph (i) of this Section, the place and time of the hearing shall be determined in the sole discretion of the Secretary, who shall endeavor to accommodate, if possible, the preferences of all parties as indicated in a timely-filed pleading. Upon setting the initial hearing date, NFA shall serve notice on each party at least 45 days before the hearing of the date, time and place. NFA shall give reasonable notice of any rescheduled oral hearing date.

              (c) Failure to Prosecute or Defend.

              At the written request of any party or on its own motion, the Panel may review the procedural history of the proceeding and any written submissions and may find that a party had failed to prosecute or defend the proceeding. Any party found to have failed to prosecute or defend the proceeding will be deemed to have waived his right to an oral hearing.

              (d) Procedure.

                (1) Each party may appear personally at an oral hearing to testify and produce evidence.

                (2) Each party (or the party's representative) may present opening and closing arguments, and may examine any other party or witness at an oral hearing and any evidence produced at the oral hearing.

                (3) The Panel need not apply the technical rules of evidence.

                (4) Any party may cause a verbatim record of an oral hearing to be made at its own expense.

                (5) All testimony at the oral hearing shall be given under oath.

                (6) The Panel may allow stipulations and establish other procedures as appropriate to expedite the hearing. The Panel may consider affidavits but shall give them such weight as it deems appropriate after considering objections to them.

                (7) The Panel may order Members, employees thereof, and Associates to testify and produce documentary evidence. The Panel may issue subpoenas to non-Members as authorized by law. The parties must submit all subpoena requests to the Panel and serve those requests in accordance with Section 15(b) below. Subpoenas issued by the Panel may be enforced in a court of competent jurisdiction.

                (8) The party requesting the appearance of a non-party witness shall bear all reasonable costs of such appearance. For purposes of this section, an employee or an Associate of any party shall be considered a party witness.

                (9) All conduct and statements, offers and promises, whether oral or written, made by the parties or their representatives in connection with a mediation proceeding shall be confidential and shall not be admissible for any purpose, including impeachment, in any pending or subsequent arbitration proceeding. The mediator may not be called as a witness in a pending or subsequent arbitration proceeding.

                (10) In all other respects, the hearing procedures shall be determined by the Panel. The Panel shall afford the parties every reasonable opportunity to present their case completely.

              (e) Extensions and Postponements.

              Extensions of time or postponements of the hearing may be granted by the Panel when the interests of justice so require, but a hearing in progress shall not be adjourned or interrupted except in compelling circumstances.

              (f) Failure to Comply.

              The failure of any party to appear at any hearing or any session thereof, or to comply with any notice, order, or procedure in connection therewith, may subject the party to such adverse action as the Panel deems appropriate, including the entry of an award or the dismissal of a claim.

              (g) Reopening the Record.

              The record may be reopened by the Panel on its own motion or on the motion of a party for good cause at any time prior to the Panel rendering its award. A motion to reopen the record shall automatically stay the time period in which the award shall be rendered.

              (h) Waiver of Defects.

              Where appropriate, the Panel may excuse any failure to comply with any provision of this section, or any Panel notice, order or procedure.

              (i) Summary Proceeding.

              The proceedings shall be conducted entirely through written submissions when:

                (1) the aggregate amount of the claims (exclusive of interest and costs) does not exceed $25,000, unless the Secretary of the Panel directs otherwise;

                (2) the aggregate amount of the claims (exclusive of interest and costs) is more than $25,000 but not more than $50,000, unless the Secretary or the Panel directs otherwise or one of the parties to the proceeding serves a written request for an oral hearing on NFA no later than 30 days after the last pleading is due; or

                (3) the Panel has consented to the written agreement of the parties to waive the oral hearing. A written agreement is not required of any party that has waived its right to an oral hearing under any other provision of these Rules.


              SECTION 10. AWARD, SETTLEMENT AND WITHDRAWAL.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 17, 1993; March 24, 1994; March 12, 1996; June 23, 1997; June 1, 1999; September 1, 1999; March 21, 2001; March 10, 2005; June 1, 2006; October 1, 2006; and July 7, 2011.]

              (a) Issuance of Award.

              The Panel shall notify NFA of its decision within 30 days after the record is closed. NFA shall then prepare a written award form, to be dated and signed by the Panel members. NFA shall promptly serve a copy of the award on each party or its representative. The award shall be that of the Panel majority.

              (b) Relief.

              The award may grant or deny any of the relief requested and may include an assessment of interest, costs or fees (See Sections 7, 11 and 12). A request for declaratory relief will only be heard by the arbitrators if the Respondent agrees to have the arbitrators hear the claim.

              (c) Finality.

              The Panel's award shall be final on the date thereof. The award may be modified by the Panel if a party submits a written request for modification which is received by NFA within 20 days from the date of service of the award on the parties, and the Panel deems modification necessary because:

                (1) there is an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award;

                (2) the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted; or

                (3) the award is imperfect in matter of form not affecting the merits of the controversy.

              NFA will not forward a modification request to the Panel unless it is based on one of the grounds listed above. The timely filing of a request for modification shall stay automatically the finality of any award until NFA rejects the request or the Panel either modifies the award or denies the request for modification.

              (d) Appeal.

              There shall be no right of appeal of the award.

              (e) Award Binding.

              All parties shall be bound by the award and any modification thereof.

              (f) Judgment.

              Judgment on the award may be entered in any court of competent jurisdiction.

              (g) Failure to Comply.

              (1) The President may, on 30 days written notice, summarily suspend a Member or Associate when the Member, or employee thereof, or Associate:

                (i) fails to comply with an award within 30 days from the date of service of the award by NFA or such other period as specified in the award unless

                  (A) a request to modify the award is pending under Section 10(c) or

                  (B) the Member or Associate who failed to comply has a pending application to vacate, modify or correct the award in a court of competent jurisdiction and has posted a bond with NFA equal to 150% of the amount of the award against that person or such lesser amount as NFA shall require in a particular case, but not less than 110% unless a satisfactory bond has been posted with the court; or

                (ii) fails to comply with a settlement agreement within 30 days after NFA terminates the arbitration proceeding pursuant to Section 10(h) or such other period as specified in the settlement agreement, or

                (iii)  fails to pay any fee assessed within the time so ordered by the Panel.

              The suspension shall remain in effect until such award, settlement agreement, or order of the Panel has been satisfied.

              (2) The President may, on 30 days written notice, summarily bar from Membership or Associate Membership a former Member or Associate when that former Member, or employee thereof, or former Associate:

                (i) fails to comply with an award within 30 days from the date of the service of the award by NFA or such other period as specified in the award unless

                  (A) a request to modify the award is pending under Section 10(c) or

                  (B) the former Member or former Associate who failed to comply has a pending application to vacate, modify or correct the award in a court of competent jurisdiction and has posted a bond with NFA equal to 150% of the amount of the award against that person or such lesser amount as NFA shall require in a particular case, but not less than 110% unless a satisfactory bond has been posted with the court;

                (ii) fails to comply with a settlement agreement within 30 days after NFA terminates the arbitration proceeding pursuant to Section 10(h) or such other period as specified in the settlement agreement, or

                (iii) fails to pay any fee assessed within the time so ordered by the Panel.

              The bar shall remain in effect until such award, settlement agreement, or order of the Panel has been satisfied.

              (3) A Member which guaranteed an IB during the relevant time may, on 30 days written notice, be summarily suspended by the President if the guarantor fails to pay an award issued against the IB under Section 10(c) or a settlement agreement entered into by the IB under Section 10(h) within 30 days after the guarantor has received actual notice that IB has failed to comply with the award or settlement agreement. The suspension shall be lifted if the award or settlement agreement is satisfied.

              (4) The President may, on 30 days written notice, summarily bar a former Member which guaranteed an IB during the relevant time if the guarantor fails to pay an award issued against the IB under Section 10(c) or a settlement agreement entered into by the IB under Section 10(h) within 30 days after the guarantor has received actual notice that the IB has failed to comply with the award or settlement agreement. The bar shall be lifted if the award or settlement agreement is satisfied.

              (5) When any Member or Associate fails to comply with any interim order issued under Section 7(e) above, that Member or Associate may be summarily suspended by the President until the Member or Associate complies with the order. Any Member or Associate subject to a summary suspension may, within 30 days of the date of service of the Notice of Suspension, appeal the suspension to the Commission and may, within 10 days of service of the Notice of Suspension, petition the Commission for a stay of the suspension.

              (6) In lieu of or in addition to suspending any Member or Associate for failing to comply with an award, s6ttlement agreement or Panel order, NFA may initiate disciplinary action under its Compliance Rules for the failure of any Member or Associate to comply with the award, settlement agreement or Panel's order.

              (h) Satisfaction of Demand.

              At any time during the course of an arbitration, a party may satisfy a claim by payment or settlement, including settlement through mediation. The arbitration proceeding will terminate upon receipt of written notice of satisfaction and withdrawal of the claim duly executed by the parties and submitted to NFA. If NFA is notified that a claim has been settled, but the notification is not in writing or is not duly executed by the parties, NFA shall send written notice to the parties that the arbitration proceeding will terminate within 20 days of service of such notice unless NFA receives written notice that the claim has not been settled.

              (i) Consent Award.

              If parties agree to satisfy a claim at any time during the arbitration, the Panel may, at the request of such parties, set forth the terms of the satisfied claim in a consent award.

              (j) Withdrawal of Claim.

                (1) At any time during the course of the arbitration, a party may withdraw a claim against any Respondent who has not filed an Answer. A written notice of withdrawal must be filed with NFA. The withdrawal will be without prejudice unless the notice states otherwise.

                (2) After a party has filed a pleading, another party may not withdraw a claim against that party unless the party consents. The notice and the consent must be in writing and filed with NFA. The withdrawal will be without prejudice unless the notice or the consent states otherwise.


              SECTION 11. ARBITRATION FEES.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994; December 12, 1995; June 23, 1997; February 1, 2000; May 1, 2001; March 1, 2002 and October 1, 2009.]

              (a) Filing and Hearing Fees.

              (1) Each Member or Associate filing a claim under these Rules shall pay a filing and hearing fee based on the amount claimed, including punitive and treble damages but exclusive of interest and costs, as follows:

              Amount of Claim

              Filing Fee

              Hearing Fee

              $0.00 - $10,000.00

              $750.00

              $125.00

              $10,000.01 - $20,000.00

              $1,900.00

              $125.00

              $20,000.01 - $50,000.00

              $1,900.00

              $125.00

              $50,000.01 - $100,000.00

              $3,000.00

              $275.00

              $100,000.01 - $150,000.00

              $4,400.00

              $1,275.00

              $150,000.01 - $500,000.00

              $4,400.00

              $2,550.00

              More than $500,000.00

              $4,400.00

              $5,100.00

              (2) Where the hearing fees paid by the parties is not enough to cover the standard preset fees to be paid by NFA to the arbitrators, NFA shall collect additional fees to cover the fees to be paid to the arbitrators. If a case requires more than four days of hearing, the hearing fees will be twice the standard preset fees, unless the arbitrators order the fees to remain at the standard amount.

              (3) NFA shall also collect additional hearing fees when:

                (i) a party requests a preliminary hearing under Section 9(a);

                (ii) a party requests an oral hearing under Section 9(i)(2); or

                (iii) all the parties make a written request for three arbitrators under Section 3(a)(1). However, where the sole arbitrator asks NFA to appoint two additional arbitrators, NFA shall assess the additional fees equally against the parties.

              (4) The arbitrators, in their discretion, may assess the entire fee against any party or may divide the fee among any or all parties. Hearing fees shall be paid to NFA in advance of the hearing sessions to which they apply.

              (b) Refunds.

                (1) A full refund of any filing and hearing fees paid under Section 11(a) above shall be made if, prior to the appointment of a Panel, a claim filed under Section 2 above is found to be not arbitrable.

                (2) If all claims have been settled or withdrawn and NFA receives notice of the settlement or withdrawal at least five days in advance of the first scheduled pre-hearing conference date, if one is scheduled, or at least 30 days in advance of the first scheduled preliminary hearing date or oral hearing date, if no pre-hearing conference is scheduled, a full refund of the hearing fees paid under Section 11(a) and the arbitration service fees paid under Section 5(e) shall be made to the party paying the fee.

                (3) If all claims have been settled or withdrawn and NFA receives written notice of the settlement or withdrawal at least 15 days in advance of the summary proceeding start date or first scheduled oral hearing date or preliminary hearing date, the hearing fees paid under Section 11(a) and arbitration service fees paid under Section 5(e) shall be refunded to the party paying the fee in accordance with the schedule below.

              Amount of Claim

              Hearing Fee Refund

              Service Fee Refund

              $0.00 - $50,000.00

              $25.00

              N/A

              $50,000.01 - $100,000.00

              $125.00

              $125.00

              $100,000.01 - $150,000.00

              $925.00

              $325.00

              $150,000.01 - $500,000.00

              $2,200.00

              $325.00

              More than $500,000.00

              $4,750.00

              $325.00

              (c) Postponement Fees.

              Each party causing an adjournment or postponement of any scheduled oral hearing shall pay to NFA a postponement fee of $300 for the first postponement request by that party, $500 for the second request by that party, and $1,000 for any subsequent request by that party. This fee may be waived at the discretion of the arbitrators. The arbitrators also may assess reasonable and necessary expenses incurred by the parties and their witnesses, including reasonable attorneys' fees, as a result of a postponement. No fee shall be assessed if an arbitrator becomes ineligible or otherwise unable to serve, or if a hearing extends over the expected time period.


              SECTION 12. ARBITRATION COSTS.

              [Adopted effective February 18, 1992. Effective dates of amendments: May 1, 1994 and March 12, 1996.]

              A Panel may assess against a party any one or more of the following costs, upon a finding that such party's claim or defense was frivolous or was made in bad faith, or that the party engaged in willful acts of bad faith during the arbitration: Reasonable and necessary expenses incurred by (a) the arbitrators or (b) any other party or witness, including reasonable attorneys' fees. The Panel may also award attorneys' fees provided that a statutory or contractual basis exists for awarding such fees. Requests for attorneys' fees and costs incurred in the arbitration proceeding must be raised in the proceeding or they are waived.


              SECTION 13. NON-WAIVER OF NFA RIGHTS

              [Adopted effective February 18, 1992.]

              The submission of a matter to arbitration under these Rules shall not affect any right of NFA regarding the matter, including the right to initiate a disciplinary proceeding.


              SECTION 14. MEDIATION.

              [Adopted effective February 18, 1992. Effective dates of amendments: March 21, 2001]

              NFA may, in its discretion, notify the parties of the option to proceed to mediation.


              SECTION 15. MISCELLANEOUS.

              [Adopted effective February 18, 1992. Effective dates of amendments: June 23, 1997; March 21, 2001 and March 1, 2002]

              (a) Computation of Time.

                (1) Except as otherwise provided in these Rules, service shall be deemed to occur on the earlier of the date that the documents are faxed (as evidenced by affidavit of service), e-mailed (as evidenced by affidavit of service), postal mailed (as evidenced by postmark or affidavit of service), or the date personally delivered (as evidenced by affidavit of service).

                (2) The counting of days shall include all calendar days and should a due date fall on a weekend or a legal holiday, such due date will be computed as the next business day on which mail is delivered.

              (b) Service of Process.

              Unless otherwise indicated, service may be accomplished by hand delivery, or by first class or certified mail, or by use of a generally recognized overnight delivery service to the party's last known business or home address on record with NFA. Documents may also be served by facsimile or electronic mail on NFA and any party who has consented to service by that method. All documents which are served on NFA shall be concurrently served on each party who has filed a pleading using methods designed to ensure that NFA and all parties will receive the documents on the same day. Service on a party's representative shall be service on the party.

              (c) Address of Record.

              A party shall promptly notify NFA of any change in the party's address or addresses, including the party's e-mail address or facsimile number, or the address of the party's representative on record with NFA.


              SECTION 16. AGREEMENTS CONFLICTING WITH THE RULES.

              [Adopted effective May 17, 1993. Effective dates of amendments: March 24, 1994.]

              These Rules shall supersede any provision in an agreement entered into between the parties, either before or after a dispute arises, if the provision in the agreement contradicts or limits the Rules or imposes additional obligations on NFA or the arbitrators. However, in the Secretary's discretion, the provision may be applied to NFA arbitration if the agreement names NFA as the arbitration forum or the parties consent in writing to apply the provision to NFA arbitration.


              SECTION 17. NFA'S AUTHORITY TO INTERPRET THE RULES.

              [Adopted effective June 1, 1999.]

              NFA has the authority to interpret the provisions of these Rules.


              Financial Requirements


              SECTION 1. FUTURES COMMISSION MERCHANT FINANCIAL REQUIREMENTS.

              [Effective dates of amendments: December 17, 1999; October 31, 2000; January 10, 2001; December 31, 2001; September 30, 2004; July 31, 2006; February 13, 2007; October 31, 2008; March 31, 2010; October 18, 2010; June 30, 2013; January 14, 2016; and September 19, 2016.]

              (a) Each NFA Member that is registered or required to be registered with the Commodity Futures Trading Commission (hereinafter "CFTC") as a Futures Commission Merchant (hereinafter "Member FCM") must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

                (i) $1,000,000;

                (ii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $6,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);

                (iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored (including APs sponsored by guaranteed IBs);

                (iv) For securities brokers and dealers, the amount of net capital specified in Rule 15c3-1(a) of the Regulations of the Securities and Exchange Commission (17 CFR 240.15c3-1(a));

                (v) Eight (8) percent of domestic and foreign domiciled customer and non-customer (excluding proprietary) risk maintenance margin/performance bond requirements for all domestic and foreign futures, options on futures contracts and cleared over-the counter derivatives positions excluding the risk margin associated with naked long option positions;

                (vi) For a Member FCM that acts as counterparty to a forex transaction (as forex is defined in Bylaw 1507(b) but excluding the counterparty limitation contained in Bylaw 1507(b)(2)), $20,000,000, except that Forex Dealer Members must meet the requirements in Financial Requirements Section 11.

              (b) Each Member FCM for which NFA is the designated self-regulatory organization ("DSRO") must file financial reports with NFA for each month-end, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-FCM or, if the Member is a broker-dealer, on Form 1-FR-FCM or the FOCUS Report, and all financial reports must be filed electronically using an electronic medium approved by NFA.

              (c) A Member FCM for which NFA is the DSRO that is required to file any document with or give any notice to its DSRO under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA, in a form and manner required by NFA, no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

              (d) No Member FCM may use forex customer equity as capital or may record forex customer equity as an asset without recording a corresponding liability. For purposes of this requirement:

                (i) Forex customer means any person who is not an eligible contract participant, as defined in Section 1a(18) of the Act, who enters into forex transactions (as defined in Bylaw 1507(b)) with the FCM or any of its affiliates described in section 2(c)(2)(B)(ii)(III); and

                (ii) Forex customer equity means money, securities, and property received by the FCM or any of its affiliates described in section 2(c)(2)(B)(ii)(III) to margin, guarantee, or secure forex transactions between a forex customer and the FCM or any of its affiliates described in section 2(c)(2)(B)(ii)(III) or accruing to a forex customer as a result of such transactions.


              SECTION 2. ELIGIBILITY TO GUARANTEE IBS.

              [Effective dates of amendments: December 17, 1999; December 31, 2001; September 30, 2004; December 4, 2006; October 20, 2008; and June 14, 2010.]

              (a) A Member FCM, other than a Forex Dealer Member, which knows or should know that its Adjusted Net Capital is less than the greatest of:

                (i) 150% of the amount set forth in NFA Financial Requirements Section 1(a)(i);

                (ii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $9,000 for each remote location operated (i.e., proprietary branch offices, main office of each guaranteed IB and branch offices of each guaranteed IB);

                (iii) For Member FCMs with less than $2,000,000 in Adjusted Net Capital, $4,500 for each AP sponsored (including APs sponsored by guaranteed IBs);

                (iv) For securities brokers or dealers, the amount of capital specified in Rule 17(a)-11(b) of the Regulations of the Securities and Exchange Commission (17 CFR 240.17a-11(b)); or

                (v) One hundred and ten (110) percent of the amount required in Financial Requirements Section 1(a)(v)

              may not enter into a guarantee agreement with an IB until it files three successive month-end statements where the Member FCM's Adjusted Net Capital is equal to or greater than the amount required by this subsection.

              (b) A Forex Dealer Member which knows or should know that its Adjusted Net Capital is less than the amount required by Financial Requirements Section 11 may not enter into a guarantee agreement with an IB until it files three successive month-end statements where the Member FDM's Adjusted Net Capital is equal to or greater than the amount required by Financial Requirements Section 11.

              (c) A Member FCM or RFED which is a party to a guarantee agreement with an IB and whose Adjusted Net Capital is less than the amount set forth in paragraph (a) or (b) of this Section, as applicable, must also provide its DSRO, NFA and any IBs which it guarantees with a notice that the FCM's or RFED's Adjusted Net Capital is less than the amount required by paragraph (a) or (b). If the FCM or RFED cannot demonstrate to NFA and its DSRO, within 30 days after filing the required notice, that its Adjusted Net Capital is greater than the amount required by paragraph (a) or (b), the FCM must immediately notify, in writing, any IB which it guarantees that the guarantee agreement will terminate 30 days following the notice. A copy of the notice must also be filed with the CFTC, NFA, and the DSRO of the FCM or RFED. If the FCM or RFED demonstrates to its DSRO and NFA prior to the effective date of the termination of the guarantee agreement that its Adjusted Net Capital is greater than the amount required by paragraph (a) or (b), then it may notify any IB which it guarantees, the CFTC, NFA, and its DSRO, that the guarantee agreement will not terminate.


              SECTION 3. RELIEF REQUESTS.

              [Effective dates of amendments: December 17, 1999 and October 18, 2010.]

              A Member FCM, for which NFA is DSRO, RFED, or IB that may file a request for relief from certain provisions of CFTC Regulations 1.10, 1.12, 1.16, 1.17, 5.6 and 5.7 with its DSRO may file such request with NFA. NFA may grant the relief request without receiving the prior concurrence of the CFTC unless such concurrence is required by CFTC Regulations. Any such grant of relief shall be valid and shall remain in full force and effect unless or until reversed by the CFTC or withdrawn by NFA.


              SECTION 4. FINANCIAL REQUIREMENTS AND TREATMENT OF CUSTOMER PROPERTY.

              [Effective dates of amendments: December 17, 1999; June 2, 2008; October 4, 2010; October 18, 2010; September 1, 2012; February 15, 2013; and September 6, 2013.]

              (a) Any Member FCM, RFED, or IB who violates any of CFTC Regulations 1.10, 1.12, 1.16, 1.17, 1.20 through 1.30, 5.6, 5.7, 30.7 or 22.2 through 22.16 (as applicable) shall be deemed to have violated an NFA Requirement.

              (b) Each Member FCM must instruct each depository, as required by NFA, holding customer segregated funds under CFTC Regulation 1.20, customer secured amount funds under CFTC Regulation 30.7 or cleared swaps customer collateral under CFTC Regulation 22.2 to report the balances in the FCM's customer segregated funds, customer secured amount funds and cleared swaps customer collateral accounts to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

              (c) In addition to the requirements of CFTC Regulation 1.49(d), in order to be an acceptable depository to hold customer segregated funds accounts identified in CFTC Regulation 1.20, the depository must report the balances in the FCM's customer segregated funds account(s) held at the depository to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

              (d) In addition to the requirements of CFTC Regulation 30.7(c), in order to be an acceptable depository to hold customer secured amount accounts identified in CFTC Regulation 30.7, the depository must report balances in the FCM's customer secured amount account(s) held at the depository to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

              (e) In addition to the requirements of CFTC Regulation 22.4, in order to be an acceptable depository to hold cleared swaps customer collateral accounts identified in CFTC Regulation 22.2, the depository must report balances in the FCM's cleared swaps customer collateral account(s) held at the depository to NFA or a third party designated by NFA in the form and manner prescribed by NFA.


              SECTION 5. INTRODUCING BROKER FINANCIAL REQUIREMENTS.

              [Effective dates of amendments: December 17, 1999; December 31, 2001; June 30, 2004; September 30, 2004; July 31, 2006; December 22, 2006; July 18, 2012; and September 30, 2014.]

              (a) Each Member IB, except an IB operating pursuant to a guarantee agreement which meets the requirements set forth in CFTC Regulation 1.10(j), must maintain Adjusted Net Capital (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

                (i) $45,000;

                (ii) For Member IBs with less than $1,000,000 in Adjusted Net Capital, $6,000 per office operated by the IB (including the main office);

                (iii) For Member IBs with less than $1,000,000 in Adjusted Net Capital, $3,000 for each AP sponsored by the IB; or

                (iv) For securities brokers and dealers, the amount of net capital required by Rule 15c3-1(a) of the Securities and Exchange Commission (17 CFR 240.15c3-1(a)).

              (b)

                (1) Each Member IB, except an IB operating pursuant to a guarantee agreement which meets the requirements set forth in CFTC Regulation 1.10(j), must file financial reports with NFA semi-annually, including its fiscal year end, within 17 business days of the date for which the report is prepared. All financial reports must be filed on Form 1-FR-IB or, if the Member is a broker-dealer, on Form 1-FR-IB or the FOCUS Report, and all financial reports must be filed electronically.

                (2) The Member IB shall electronically file its financial reports by accessing NFA's financial reports database in the manner provided by NFA. Each Member IB shall designate, in the manner provided by NFA, the person or persons authorized to file its financial reports.

                (3) The electronic filing of the Member IB's financial report shall constitute:

                  (A) a representation that the person electronically filing the financial report is a person specified in CFTC Regulation 1.10 (d)(4);

                  (B) an attestation that the person electronically filing the financial report is duly authorized to bind the Member IB submitting the financial report and representation that, to the best of such person's knowledge, all information contained therein is true, correct and complete;

                  (C) an acknowledgement that it is understood that all required items and statements are integral parts of the financial report and that the submission of any amendment represents that all unamended items and statements remain true, correct and complete as previously submitted; and

                  (D) an acknowledgement that it is further understood that any intentional misreports or omissions of facts constitute Federal Criminal Violations (see 18 U.S.C. 1001).

                (4)

                  (A) No Member IB may access NFA's electronic financial reports database until NFA has assigned it a unique identifying code and password;

                  (B) Each Member IB is responsible for maintaining the security and confidentiality of its identifying code and password and those of the persons whom it authorizes to make electronic financial report filings on its behalf. NFA's electronic financial reports database shall record and store the identifying code of each person accessing NFA's database and shall logically associate in the database such identifying code with any electronic filing made by the person using such identifying code. The person whose identifying code is used to make an electronic filing will be deemed to have made such filing;

                  (C) Each Member IB shall make available any person it has authorized to make or actually performing duties related to electronic filings, for testimony in court or before the Commission, NFA or any contract market regarding the authentication, integrity or accuracy of any electronic filing; and

                  (D) The ability to electronically access NFA's financial reports database is a privilege and not a right. NFA may disable any person's identifying code and password and terminate the person's ability to access the database at any time, without notice or a hearing, in NFA's sole discretion, if NFA believes that the person has not complied with this Financial Requirements Section 5 or any procedures that NFA establishes to implement this Financial Requirements Section 5.

              (c) A Member IB that is required to file any document with or give any notice to the CFTC under CFTC Regulations 1.10 [Financial reports of futures commission merchants and introducing brokers], 1.12 [Maintenance of minimum financial requirements by futures commission merchants and introducing brokers], 1.16 [Qualifications and reports of accountants], or 1.17 [Minimum financial requirements for futures commission merchants and introducing brokers] or is required to file any financial report or statement (e.g., FOCUS Reports) with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.


              SECTION 6. LEVERAGE TRANSACTION MERCHANT FINANCIAL AND REPORTING REQUIREMENTS.

              [Effective dates of amendments: December 17, 1999 and October 3, 2011.]

              (a) Each Leverage Transaction Merchant (hereinafter “Member LTM") must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 1.17) equal to or in excess of the greatest of:

                (i) $20,000,000;

                (ii) the amount required by subsection (a)(i) above plus 5% of all liabilities owed to leverage customers (as leverage customer is defined in CFTC Regulation 31.4) exceeding $10,000,000; or

                (iii) for Member LTMs registered in another capacity, any other amount required by these Financial Requirements.

              (b) Each Member LTM required to file any document with or give notice to the CFTC under CFTC Regulations 31.7 [Maintenance of minimum financial, cover and segregation requirements by leverage transaction merchants], 31.13 [Financial reports of leverage transaction merchants], 31.16 [Monthly reporting requirements], and 31.26 [Quarterly reporting requirements] shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC.


              SECTION 7. PERFORMANCE MARGIN.

              [Effective dates of amendments: December 17, 1999.]

              Every Member FCM that is not a member of a contract market or a foreign board of trade must collect performance margin (initial and maintenance) for all customer accounts at a level no less than that established for customer accounts by the rules of the applicable contract market or a foreign board of trade.


              SECTION 8. INFORMATION REQUESTS.

              [Effective dates of amendments: December 17, 1999, October 18, 2010 and March 21, 2014.]

              (a) If requested by NFA, a Member FCM, RFED, or IB must promptly submit such additional reports and supplemental financial information which NFA deems necessary.

              (b) Each FCM for which NFA is the DSRO and each FDM must file the financial, operational, risk management and other information required by NFA in the form and manner prescribed by NFA.


              SECTION 9. NOTIFICATION OF REPORTABLE POSITIONS.

              [Effective dates of amendments: December 17, 1999.]

              Each Member FCM for which NFA is the DSRO and which is required to file any document with or give notice to the CFTC under CFTC Regulation 15.03 shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC.


              SECTION 10. LATE FINANCIAL REPORTS.

              [Adopted Effective July 1, 2003. Effective dates of amendments: October 18, 2010; and December 2, 2013.]

              Each financial report required by Section 1, 5, 6, or 11 that is filed after it is due shall be accompanied by a fee of $1,000 for each business day it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action under the Compliance Rules for failure to comply with the deadlines imposed by NFA Financial Requirements or CFTC rules.


              SECTION 11. FOREX DEALER MEMBER FINANCIAL REQUIREMENTS.

              [Adopted Effective December 1, 2003. Effective dates of amendments: June 6, 2004; November 30, 2005; July 31, 2006; August 9, 2006; February 13, 2007; March 31, 2007; May 7, 2007; December 17, 2007; December 21, 2007; October 31, 2008; November 30, 2009; October 1, 2010; October 18, 2010; February 1, 2011 and January 4, 2016.]

              (a) Each Forex Dealer Member must maintain "Adjusted Net Capital" (as defined in CFTC Regulation 5.7) equal to or in excess of the greatest of:

                (i) $20,000,000;

                (ii) the amount required by subsection (a)(i) above plus:

                  (aa) 5% of all liabilities the Forex Dealer Member owes to customers (as customer is defined in Compliance Rule 2-36(q)(2)) and to eligible contract participant counterparties that are not an affiliate of the Forex Dealer Member and are not acting as a dealer exceeding $10,000,000; and

                  (bb) 10% of all liabilities the Forex Dealer Member owes to eligible contract participant counterparties that are an affiliate of the Forex Dealer Member not acting as a dealer; and

                  (cc) 10% of all liabilities eligible contract participant counterparties that are an affiliate of the Forex Dealer Member and acting as a dealer owe to their customers (including eligible contract participants), including liabilities related to retail commodity transactions as described in Section 2(c)(2)(D) of the Act; and

                  (dd) 10% of all liabilities the Forex Dealer Member owes to eligible contract participant counterparties acting as a dealer that are not an affiliate of the Forex Dealer Member, including liabilities related to retail commodity transactions as described in Section 2(c)(2)(D) of the Act;

                  or

                (iii) For FCMs, any other amount required by Section 1 of these Financial Requirements.

              (b) A Forex Dealer Member may not include assets held by an affiliate (unless approved by NFA) or an unregulated person in its current assets for purposes of determining its adjusted net capital under CFTC Regulation 5.7.

              For purposes of this section and section (c), a person is unregulated unless it is:

                (i) a bank or trust company regulated by a U.S. banking regulator;

                (ii) a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority;

                (iii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

                (iv) a retail foreign exchange dealer registered with the U.S. Commodity Futures Trading Commission and a Member of NFA;

                (v) a bank or trust company regulated in a money center country which has in excess of $1 billion in regulatory capital; or

                (vi) any other entity approved by NFA.

              (c) A Forex Dealer Member may not use an affiliate (unless approved by NFA) or an unregulated person, as defined in section (b), to cover its currency positions for purposes of CFTC Regulation 5.7(b)(2)(v)(A).

              (d) An FDM for which NFA is the DSRO that is required to file any document with or give any notice to its DSRO under CFTC Regulations 5.6 [Maintenance of minimum financial requirements by retail foreign exchange dealers and futures commission merchants offering or engaging in retail forex transactions], 5.7 [ Minimum financial requirements for retail foreign exchange dealers and future commission merchants offering or engaging in retail forex transactions] and 5.12 [Financial reports of retail foreign exchange dealers], or is required to file any financial report or statement with any other securities or futures self-regulatory organization of which it is a member shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC or the self-regulatory organization.

              (e) For purposes of this rule:

                (1) "Forex" has the same meaning as in Bylaw 1507(b);

                (2) "Forex Dealer Member" has the same meaning as in Bylaw 306;

                (3) As used in section (c), "currency" refers to open foreign currency positions with counterparties regardless of whether those counterparties are eligible contract participants as defined in Section 1a(18) of the Act;

                (4) "Affiliate" means any person that controls, is controlled by, or is under common control with the Forex Dealer Member; and

                (5) "Dealer" means any person that (i) holds itself out as a dealer in forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act; (ii) makes a market in forex or in retail commodity transactions as defined in 2(c)(2)(D) of the Act; (iii) regularly enters into forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act with counterparties as an ordinary course of business for its own account; or (iv) engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in forex or in retail commodity transactions as described in 2(c)(2)(D) of the Act. Dealer includes other FDMs, as well as any entity acting in this manner that is not required to be an FDM. For purposes of (a)(ii)(dd) above, dealer does not include a bank or trust company regulated in a money center country which has in excess of $1 billion in regulatory capital.


              SECTION 12. SECURITY DEPOSITS FOR FOREX TRANSACTIONS WITH FOREX DEALER MEMBERS.

              [Adopted Effective December 1, 2003. Effective dates of amendments: June 6, 2004; September 15, 2005; February 13, 2007; May 14, 2008; October 31, 2008; November 30, 2009; October 18, 2010 and January 4, 2016.]

              (a) Each Forex Dealer Member shall collect and maintain the following minimum security deposit for each forex transaction between the Forex Dealer Member and its customers and/or eligible contract participant counterparties:

                (i) 2% of the notional value of transactions in the British pound, the Swiss franc, the Canadian dollar, the Japanese yen, the Euro, the Australian dollar, the New Zealand dollar, the Swedish krona, the Norwegian krone, and the Danish krone;

                (ii) 5% of the notional value of other transactions;

                (iii) for short options, the above amount plus the premium received; and

                (iv) for long options, the entire premium.

              (b) The Executive Committee may temporarily increase these requirements under extraordinary market conditions.

              (c) For purposes of this rule:

                (1) "Forex" has the same meaning as in Bylaw 1507(b); and

                (2) "Forex Dealer Member" has the same meaning as in Bylaw 306.

              (d) In addition to cash, a Forex Dealer Member may accept those instruments described in CFTC Rule 1.25 as collateral for customers' security deposit obligations. The collateral must be in the FDM's possession and control and is subject to the haircuts in CFTC Rule 1.17.

              (e) An FDM is required to collect additional security deposits from a retail forex customer, or liquidate the retail forex customer’s positions, if the amount of the retail forex customer’s security deposits maintained with the FDM is not sufficient to meet the requirements of this section.

              (f) An FDM is required to immediately notify NFA's Compliance Department if the FDM changes the security deposit amount established by either subsection (a) or (b) above provided, however, that any decrease cannot fall below the highest minimum security deposit amount required by either subsection (a) or (b) as applicable to a particular currency.

              (g) An FDM is prohibited from acting as a counterparty to an eligible contract participant acting as a dealer (as that term is defined in Financial Requirements Section 11(e)) unless that dealer collects and maintains from its customers and eligible contract participant counterparties security deposit amounts for forex equal or greater to the amounts required in subsection(s) (a) and (b).


              SECTION 13. FOREX DEALER MEMBER REPORTS.

              [Adopted Effective July 25, 2006. Effective dates of amendments: April 1, 2009; January 2, 2012; September 25, 2012; and December 2, 2013.]

              (a) Each Forex Dealer Member must file electronically the following reports with NFA within the specified time periods in a form and manner prescribed by NFA:

                (1) Daily electronic reports showing liabilities to customers and any other financial or operational information required by NFA. The report must be prepared each business day and must be filed by noon on the following business day.

                (2) Monthly operational and risk management reports. These reports must be filed within seventeen business days after the end of each month for which the report is prepared.

                (3) Quarterly reports containing the most updated performance disclosures required by CFTC Regulation 5.5(e)(1)(i) - (iii). These reports must be filed within seventeen business days after the end of each quarter for which the report is prepared.

              (b) No Forex Dealer Member may access NFA's electronic financial reports database until NFA has assigned it a unique identifying code and password. Each Forex Dealer Member is responsible for maintaining the security and confidentiality of its identifying code and password and that of each person it authorizes to file electronic reports on its behalf.

              (c) Submitting any of these reports certifies that the person filing it is a supervisory employee that is, or is under the ultimate supervision of, a listed principal who is also an NFA Associate; that the person filing it is duly authorized to bind the Forex Dealer Member; and that, to the best of that person's knowledge, all information in the report is true, correct, and complete.

              (d) Any report that is filed after it is due shall be accompanied by a fee of $1,000 for each business day it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action for failure to comply with the deadlines imposed by this rule.


              SECTION 14. ASSETS COVERING LIABILITIES TO RETAIL FOREX CUSTOMERS.

              [Adopted Effective July 1, 2007. Effective dates of amendments: December 17, 2007; February 1, 2011; July 26, 2012; and October 15, 2014.]

              (a) Each Forex Dealer Member shall calculate the amount owed to customers for forex transactions and shall hold assets equal to or in excess of that amount at one or more qualifying institutions in the United States or money center countries (as defined in CFTC Regulation 1.49).

              (b) The amount owed to customers shall be calculated by adding up the net liquidating values of each forex account that liquidates to a positive number, using the fair market value for each asset other than open positions and the current market value for open positions.

              (c) For assets held in the United States, a qualifying institution is:

                (i) a bank or trust company regulated by a U.S. banking regulator;

                (ii) a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority; or

                (iii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA.

              (d) For assets held in a money center country as defined in CFTC Regulation 1.49, a qualifying institution is:

                (i) a bank or trust company regulated in the money center country which has in excess of $1 billion in regulatory capital; or

                (ii) a futures commission merchant registered with the U.S. Commodity Futures Trading Commission and a Member of NFA.

              (e) Assets held in a money center country are not eligible to meet the requirements of this rule unless the Forex Dealer Member and the qualifying institution have entered into an agreement, acceptable to NFA, authorizing the institution to provide NFA and the CFTC with information regarding the Forex Dealer Member's accounts and to provide that information directly to NFA or the CFTC upon their request. The Forex Dealer Member must file the signed agreement with NFA.

              (f) Each Forex Dealer Member must instruct each qualifying institution, as required by NFA, holding assets used to cover the Forex Dealer Member's liabilities to its retail forex customers under subsection (a), to report the balances in the Forex Dealer Member's account(s) to NFA or a third party designated by NFA in the form and manner prescribed by NFA.

              (g) In addition to the requirements of subsections (c), (d) and (e), in order to be an acceptable qualifying institution to hold assets used to cover a Forex Dealer Member's liabilities to its retail forex customers identified in subsection (a), the qualifying institution must report the balances in the Forex Dealer Member's account(s) held at the qualifying institution to NFA or a third party designated by NFA in the form and manner prescribed by NFA.


              SECTION 15. FOREX DEALER MEMBER INTERNAL FINANCIAL CONTROLS.

              [Adopted Effective September 21, 2007. Effective dates of amendments: December 17, 2009.]

              (a) No Member may act as a Forex Dealer Member (as defined in Bylaw 306) unless it has demonstrated to NFA that the Member has adequate internal financial controls. The Forex Dealer Member must demonstrate that its system of internal controls provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Forex Dealer Member must also demonstrate that its system of internal financial controls has no material weaknesses and that it is adequate for establishing and maintaining internal controls over financial reporting by the Member. A Forex Dealer Member may satisfy this obligation by obtaining an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. The internal control report shall contain, at a minimum, a detailed explanation of the examination performed by the accountant and a representation by the accountant that it has examined and tested the Forex Dealer Member's system of internal controls and that the controls comply with the above standards.

              If NFA believes that a Member's internal controls are inadequate at any time, NFA's Compliance Director may require it to provide to NFA an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. The internal control report shall meet the above standards.

              (b) Provided NFA's Compliance Director believes that a Forex Dealer Member's financial records are inadequate, the Compliance Director may require a Forex Dealer Member's annual certified financial statements to be prepared by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act.

              (c) The individuals who prepare the Forex Dealer Member's financial books and records must be under the ultimate supervision of a listed principal and registered associated person of the Member. This principal must also be responsible for researching and selecting the independent public accountant that certifies the firm's annual financial statements.


              SECTION 16. FCM FINANCIAL PRACTICES AND EXCESS SEGREGATED FUNDS/SECURED AMOUNT/CLEARED SWAPS CUSTOMER COLLATERAL DISBURSEMENTS.

              [Adopted Effective September 1, 2012. Effective dates of amendments: July 1, 2013; January 14, 2016; and March 29, 2017.]

              (a) Each Member FCM must maintain written policies and procedures regarding the maintenance of the FCM's residual interest in its customer segregated funds account(s) as identified in CFTC Regulation 1.20, in its foreign futures and foreign options customer secured amount funds account(s) as identified in CFTC Regulation 30.7 and in its cleared swaps customer collateral account(s) as identified in CFTC Regulation 22.2. The written policies and procedures must establish a target amount (either by percentage or dollars) that the FCM seeks to maintain as its residual interest in customer segregated funds, in its foreign futures and foreign options customer secured amount funds and in its cleared swaps customer collateral, and those policies and procedures must be designed to reasonably ensure the FCM maintains each of these target amounts. The FCM's Board of Directors or similar governing body 1, must approve in writing the FCM's targeted residual amount, any change(s) thereto, and any material change(s) in the FCM's written policies and procedures regarding the maintenance of the FCM's residual interest in either the customer segregated funds account(s), the foreign futures and foreign options customer secured amount funds account(s), or the cleared swaps customer collateral accounts.

              (b) No Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse funds (disbursement) from any customer segregated funds account(s) as identified under CFTC Regulation 1.20 that exceed twenty-five percent (25%) of the FCM's residual interest in customer segregated funds based upon the daily segregated funds calculation CFTC Regulation 1.32 unless:

                (i) The FCM has prepared the daily segregation calculation required by Regulation 1.32 as of the close of business on the previous business day;

                (ii) The FCM's CEO, CFO or other senior official who holds a position with knowledge of the FCM's financial requirements and financial position and is listed as a principal on the firm's Form 7-R (for purposes of this Section only, a "Financial Principal") pre-approves in writing the segregated funds disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (b) above; and

                (iii) The FCM files written notice signed by the FCM's CEO, CFO or Financial Principal that pre-approved the disbursement in the form and manner prescribed by NFA immediately after the FCM's CEO, CFO or Financial Principal pre-approves in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (b) above, which includes the following:

                  (1) Notification that the FCM has made or intends to make a disbursement(s) from segregated funds that exceeds or will exceed twenty-five percent (25%) of the FCM's residual interest in customer segregated funds based upon the daily segregated funds calculation required by CFTC Regulation 1.32 computed as of the close of business the previous business day;

                  (2) A description of the reason(s) for and the name and the amount provided to each recipient of the single or multiple transaction(s) that results or will result in the disbursement(s) that exceeds the twenty-five percent (25%) threshold;

                  (3) Confirmation that the FCM's CEO, CFO or Financial Principal pre-approved in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold; and

                  (4) The current estimate of the FCM's remaining total residual interest in the customer segregated funds account(s) after the disbursement, and a representation from the CEO, CFO or Financial Principal, that to the best of that person's knowledge and reasonable belief, after due diligence, the FCM remains in compliance with the segregation requirements after the disbursement.

                (iv) In calculating whether an FCM has exceeded or will exceed the twenty-five percent (25%) threshold, an FCM shall exclude any segregated funds disbursement(s) that is made to or for the benefit of commodity and option customers.

                (v) After making a disbursement that requires the approval and notice filing described in subsections (b)(ii) and (b)(iii) above, and until such time that the FCM completes its next daily segregated funds calculation required by CFTC Regulation 1.32, no Member FCM may make any subsequent disbursement(s) in any amount from any customer segregated funds accounts (except to or for the benefit of commodity and option customers) without for each disbursement obtaining the pre-approval required in subsection (b)(ii) and filing a written notice signed by the CEO, CFO or Financial Principal that discloses the name and amount to each recipient of the disbursement and the reason(s) for the disbursement, confirming that the CEO, CFO or Financial Principal pre-approved the disbursement in writing, indicating the current estimate of the FCM's remaining total residual interest in the customer segregated funds account(s) after the disbursement, and containing a representation that to the best of the CEO, CFO or Financial Principal's knowledge and reasonable belief, after due diligence, the FCM remains in compliance with the segregation requirements after the disbursement.

              (c) No Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse funds (disbursement) from foreign futures and foreign options customer secured amount funds account(s) as identified under CFTC Regulation 30.7 that exceed twenty-five percent (25%) of the FCM's residual interest in foreign futures and foreign option customer secured amount funds based upon the daily secured amount funds calculation required by CFTC Regulation 30.7 unless:

                (i) The FCM has prepared the daily segregation calculation required by Regulation 30.7 as of the close of business on the previous business day;

                (ii) The FCM's CEO, CFO or Financial Principal pre-approves in writing the secured amount funds disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (c) above; and

                (iii) The FCM files written notice signed by the FCM's CEO, CFO or Financial Principal that pre-approved the withdrawal in the form and manner prescribed by NFA immediately after the FCM's CEO, CFO or Financial Principal pre-approves in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (c) above, which includes the following:

                  (1) Notification that the FCM has made or intends to make a disbursement(s) from secured amount funds that exceeds or will exceed twenty-five percent (25%) of the FCM's residual interest in secured amount funds based upon the daily secured amount funds calculation performed required by CFTC Regulation 30.7 computed as of the close of business on the previous business day;

                  (2) A description of the reason(s) for and the name and amounts provide to each recipient of the single or multiple transaction(s) that results or will result in the disbursement(s) that exceeds the twenty-five percent (25%) threshold;

                  (3) Confirmation that the FCM's CEO, CFO or Financial Principal pre-approved in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold; and

                  (4) The current estimate of the FCM's remaining total residual interest in the secured amount funds account(s) after the disbursement, and a representation from the CEO, CFO or Financial Principal, that to the best of that person's knowledge and reasonable belief, after due diligence, the FCM remains in compliance with the secured amount requirements after the disbursement.

                (iv) In calculating whether an FCM has exceeded or will exceed the twenty-five percent (25%) threshold, an FCM shall exclude any secured amount funds disbursement(s) that is made to or for the benefit of foreign futures and foreign options customers.

                (v) After making a disbursement that requires the approval and notice filing described in subsections (c)(ii) and (c)(iii) above, and until such time that the FCM completes its next daily secured amount funds calculation required by CFTC Regulation 30.7, no Member FCM may make any subsequent disbursement(s) in any amount from any customer secured amount funds accounts (except to or for the benefit of foreign futures and foreign option customers) without for each disbursement obtaining the pre-approval required in subsection (c)(ii) and filing a written notice signed by the CEO, CFO or Financial Principal that discloses the name and amount to each recipient of the disbursement and the reason(s) for the disbursement, confirming that the CEO, CFO or Financial Principal pre-approved the disbursement in writing, indicating the current estimate of the FCM's remaining total residual interest in the customer secured amount funds account(s) after the disbursement, and containing a representation that to the best of the CEO, CFO or Financial Principal's knowledge and reasonable belief, after due diligence, the FCM remains in compliance with the secured amount requirements after the disbursement.

              (d) Unless acting pursuant to relief granted by the Commission in CFTC Letter No. 17-03,2 no Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse collateral (disbursement) from any cleared swaps customer collateral account(s) as identified under CFTC Regulation 22.2 that exceed twenty-five percent (25%) of the FCM's residual interest in the cleared swaps customer collateral based upon the daily cleared swaps customer collateral calculation required by CFTC Regulation 22.2(g) unless:

                (i) The FCM has prepared the daily segregation calculation required by Regulation 22.2(g) as of the close of business on the previous business day;

                (ii) The FCM's CEO, CFO or Financial Principal pre-approves in writing the cleared swaps customer collateral disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (d) above; and

                (iii) The FCM files written notice signed by the FCM's CEO, CFO or Financial Principal that pre-approved the withdrawal in the form and manner prescribed by NFA immediately after the FCM's CEO, CFO or Financial Principal pre-approves in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold referred to in (d) above, which includes the following:

                  (1) Notification that the FCM has made or intends to make a disbursement(s) from cleared swaps customer collateral that exceeds or will exceed twenty-five percent (25%) of the FCM's residual interest in cleared swaps customer collateral based upon the daily cleared swaps customer collateral calculation required by CFTC Regulation 22.2(g) computed as of the close of business on the previous business day;

                  (2) A description of the reason(s) for and the name and the amount provided to each recipient of the single or multiple transaction(s) that results or will result in the disbursement(s) that exceeds the twenty-five percent (25%) threshold;

                  (3) Confirmation that the FCM's CEO, CFO or Financial Principal pre-approved in writing the disbursement whereby the FCM exceeds or will exceed the twenty-five percent (25%) threshold; and

                  (4) The current estimate of the FCM's remaining total residual interest in the cleared swaps customer collateral account(s) after the disbursement, and a representation from the CEO, CFO or Financial Principal, that to the best of that person's knowledge and reasonable belief, after due diligence, the FCM remains in compliance with the cleared swaps customer collateral requirements after the disbursement.

                (iv) In calculating whether an FCM has exceeded or will exceed the twenty-five percent (25%) threshold, an FCM shall exclude any cleared swap customer collateral disbursement(s) that is made to or for the benefit of cleared swap collateral customers.

                (v) After making a disbursement that requires the approval and notice filing described in subsections (d)(ii) and (d)(iii) above, and until such time that the FCM completes its next daily cleared swaps customer collateral calculation required by CFTC Regulation 22.2(g), no Member FCM may make any subsequent disbursement(s) in any amount from any cleared swaps customer accounts (except to or for the benefit of cleared swap customer collateral customers) without for each disbursement obtaining the pre-approval required in subsection (d)(ii) and filing a written notice signed by the CEO, CFO or Financial Principal that discloses the name and amount to each recipient of the disbursement and the reason(s) for the disbursement, confirming that the CEO, CFO or Financial Principal pre-approved the disbursement in writing, indicating the current estimate of the FCM's remaining total residual interest in the cleared swaps customer collateral account(s) after the disbursement, and containing a representation that to the best of the CEO, CFO or Financial Principal's knowledge and reasonable belief, after due diligence, the FCM remains in compliance with the cleared swaps customer collateral requirements after the disbursement.

              (e) Each Member FCM must report the following financial and operational information to NFA in the form and manner prescribed by NFA and in accordance with the respective time periods specified:

                (i) On a monthly basis, within 17 business days after the end of each month, the following information as of the close of business on the last business day of the month:

                  (1) Adjusted net capital, minimum net capital, and excess net capital (listed in U.S. dollar figures); and

                  (2) The firm's measure of leverage (i.e., total balance sheet assets, less any instruments guaranteed by the U.S. government and held as an asset or to collateralize an asset (e.g., a reverse repo) divided by total capital (the sum of stockholder’s equity and subordinated debt)) all computed in accordance with U.S. GAAP.

                (ii) By 11:59 P.M. Eastern time on the business day following the 15th and the last business day of each month, the following information as of the close of business on the 15th (or the following business day if the 15th falls on a weekend) and the last business day of each month:

                  (1) The identity and location of each depository holding customer segregated funds and the dollar amount held at each depository;

                  (2) The dollar amount of customer segregated funds held in cash, each type of permitted investments identified in CFTC Regulation 1.25(a), customer owned securities held as margin, and as securities under agreements to resell the securities (reverse repurchase transactions) held at each depository identified in subsection (1) above;

                  (3) The identity and location of each depository holding foreign futures and foreign options customer secured amount funds and the dollar amount held at each depository;

                  (4) The dollar amount of foreign futures and foreign options customer funds held in cash, each type of permitted investments identified in CFTC Regulation 1.25(a), customer owned securities held as margin, and as securities under agreements to resell the securities (reverse repurchase transactions) held at each depository identified in subsection (3) above;

                  (5) The identity and location of each depository holding cleared swaps customer collateral and the dollar amount held at each depository;

                  (6) The dollar amount of cleared swaps customer collateral held in cash, each type of permitted investments identified in CFTC Regulation 1.25(a), customer owned securities held as margin, and as securities under agreements to resell the securities (reverse repurchase transactions) held at each depository identified in subsection (5) above; and

                  (7) The identity of each depository that held customer segregated funds, foreign futures and foreign options customer secured amount funds or cleared swaps customer collateral during the reporting period that is an affiliate of the FCM.

                (iii) By noon of each business day, the daily segregated funds computation, the daily secured amount funds computation and the daily cleared swaps customer collateral calculation as of the close of the preceding business day.

                (iv) The FCM's CEO, CFO or other individual designated by the CEO or CFO to file on his/her behalf, or where applicable, a person described in CFTC Regulation 1.10(d)(4)(ii), must submit the information required by subsections (i)-(iii) above, and by submitting the information the CEO or CFO certifies that to the best of his/her knowledge and belief the information is true, correct and complete.

                (v) Any information filed after its due date shall be accompanied by a fee of $1,000 for each business day that it is late. Payment and acceptance of the fee does not preclude NFA from filing a disciplinary action under the Compliance Rules for failure to comply with the deadlines imposed by NFA Financial Requirements.


              1 Governing Body means proprietor if FCM is a sole proprietorship; general partner if the FCM is a partnership; board of directors if the FCM is a corporation; Member(s) vested with management authority if the FCM is a LLC or LLP.

              2 See CFTC Letter No. 17-03 – No-Action Positon Regarding Regulation 22.17(b) Withdrawals of Residual Interest (January 26, 2017).


              SECTION 17. SWAP DEALER AND MAJOR SWAP PARTICIPANT REPORTING REQUIREMENTS.

              [Adopted Effective March 21, 2017.]

              Each Swap Dealer and Major Swap Participant Member must file the financial, operational, risk management and other information required by NFA in the form and manner prescribed by NFA.


              Registration Rules


              Part 100. Definitions

              Rule 101. Definitions.

              [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; September 21, 1993; August 1, 1994; November 17, 2001; May 31, 2002; September 30, 2010; July 18, 2012; and October 21, 2013.]

              As used in these Registration Rules:

              (a) "Acknowledgement of Conditioned Registration"-means a sponsor's or guarantor's representation that it meets the requirements set forth in Rule 509(b)(5) to sponsor a conditioned registrant; that it has reviewed the conditions contained in any current NFA or Commission order imposing conditions on the registration of the person; and that it will supervise the person in accordance with the conditions contained in the order. Acknowledgement of Conditioned Registration shall include any Supplemental Guarantor Certification Statement or Supplemental Sponsor Certification Statement that is required by the order.

              (b) "Act"-means the Commodity Exchange Act, which is contained in Title 7 of the United States Code.

              (c) "Applicant"-means a person seeking registration under the Act as an FCM, RFED, IB, CPO, CTA or LTM; an associated person of any of the foregoing; SD; MSP; floor broker ("FB") or floor trader ("FT").

              (d) "Associated Person" or "AP"-means an associated person as that term is used in the Act and the regulations thereunder who is required to be registered as such under the Act.

              (e) "Commission" or "CFTC"-means the Commodity Futures Trading Commission.

              (f) "Commodity Interest"-means: (1) any contract for the purchase or sale of a commodity for future delivery regulated under the Act and rules promulgated thereunder; and (2) any contract, agreement or transaction subject to Commission regulation under Sections 4c or 19 of the Act.

              (g) "Current Active Status"- a person has a current active status if, subsequent to the filing of a previous Form 7-R or Form 8-R and continuously thereafter, the person has been either pending, registered, temporarily licensed or affiliated with a registrant as a principal.

              (h) "Foreign Futures Authority"-means any foreign government or any department, agency, governmental body or regulatory organization empowered by a foreign government to administer or enforce a law, rule or regulation as it relates to a futures or options matter.

              (i) "Forex" - has the same meaning as in NFA Bylaw 1507(b).

              (j) "Form 7-R"-means the entire Form 7-R or any portions of the Form 7-R that NFA requires an applicant to file to obtain registration as an FCM, RFED, SD, MSP, IB, CPO, CTA or LTM.

              (k) "Form 8-R"-means the entire Form 8-R or any portions of the Form 8-R that NFA requires to be filed for an individual to obtain registration as an AP, FB or FT or because an individual is a principal of an applicant or registrant.

              (l) "Form 3-R"-means the entire Form 3-R or any portions of the Form 3-R that NFA requires to be filed to correct any inaccuracy or deficiency in an applicant's or registrant's registration information.

              (m) "Form 7-W"-means the entire Form 7-W or any portions of the Form 7-W that NFA requires a registrant to file to withdraw from registration or to withdraw an application for registration as an FCM, RFED, SD, MSP, IB, CPO, CTA or LTM.

              (n) "Form 8-T"-means the entire Form 8-T or any portions of the Form 8-T that NFA requires an applicant or registrant to file to notify NFA that an individual did not become or is no longer associated or affiliated with it as an AP, Branch Office Manager or principal.

              (o) "Form 8-W"-means the entire Form 8-W or any portions of the Form 8-W that NFA requires a registrant to file to withdraw from registration as a FB or FT.

              (p) "Membership Committee"-means an NFA Committee formed pursuant to NFA Bylaw 701. (p) "NFA"-means National Futures Association.

              (q) "NFA"-means National Futures Association.

              (r) "NFA Requirements"-means NFA Bylaws, Compliance Rules, Registration Rules, Financial Requirements, Code of Arbitration and Member Arbitration Rules.

              (s) "Person"-means an individual, association, partnership, corporation, trust or any other form of business organization.

              (t) "Principal"-means, with respect to an applicant, a registrant, or a person required to be registered under the Act:

                (1) an individual who is:

                  (A) a proprietor of a sole proprietorship;
                  (B) a general partner of a partnership;
                  (C) a director, president, chief executive officer, chief operating officer, chief financial officer or a person in charge of a business unit, division or function subject to regulation by the Commission of a corporation, limited liability company or limited liability partnership;
                  (D) a manager, managing member or a member vested with the management authority for a limited liability company or limited liability partnership; or
                  (E) a chief compliance officer; or

                (2) an individual who directly or indirectly, through agreement, holding companies, nominees, trusts or otherwise:

                  (A) is the owner of 10% or more of the outstanding shares of any class of an applicant or registrant's equity securities, other than non-voting securities;
                  (B) is entitled to vote 10% or more of the outstanding shares of any class of an applicant or registrant's equity securities, other than non-voting securities;
                  (C) has the power to sell or direct the sale of 10% or more of the outstanding shares of any class of an applicant or registrant's equity securities, other than non-voting securities;
                  (D) is entitled to receive 10% or more of an applicant or registrant's net profits;
                  (E) or has the power to exercise a controlling influence over an applicant or registrant's activities that are subject to regulation by the Commission; or

                (3) an entity that:

                  (A) is a general partner of a partnership; or
                  (B) is the direct owner of 10% or more of  the outstanding shares of any class of an applicant or registrant's equity securities, other than non-voting securities; or

                (4) an individual who or entity that:

                  (A) has contributed 10% or more of an applicant's or registrant's capital unless such capital consists of subordinated debt contributed by:

                    (i) an unaffiliated bank insured by the Federal Deposit Insurance Corporation;
                    (ii) an unaffiliated "foreign bank," as defined in 12 CFR 211.21(n) that currently operates an "office of a foreign bank," as defined in 12 CFR 211.21(t), which is licensed under 12 CFR 211.24(a);
                    (iii) such office of an unaffiliated, licensed foreign bank; or
                    (iv) an insurance company subject to regulation by any State,

                  provided such debt is not guaranteed by an individual who or entity that is not a principal of the applicant or registrant.

                (u) "Registrant"-means a person registered under the Act as an FCM, RFED, IB, CPO, CTA, LTM, an AP of any of the foregoing, SD, MSP, FB or FT.

                (v) "Rules"-means NFA Registration Rules.

                (w) "Swap AP"-means an associated person of an SD or MSP as defined in the Act and the regulations thereunder.

                (x) "Sponsor"-means the applicant or registrant FCM, RFED, SD, MSP, IB, CPO, CTA or LTM that files a Form 8-R for an individual associated with it to become registered as an AP or for an individual principal.

                (y) "Supplemental Guarantor Certification Statement ("SGCS")"-means a statement executed by an IB's guarantor wherein the guarantor indicates that it meets the requirements set forth in Rule 509(b)(5) to sponsor a conditioned IB and its willingness to supervise the IB subject to certain conditions imposed by NFA's President or its Membership Committee under these Rules or by the Commission.

                (z) "Supplemental Sponsor Certification Statement ("SSCS")"-means a statement executed by an AP's, FB's or FT's sponsor wherein the sponsor indicates that it meets the requirements set forth in Rule 509(b)(5) to sponsor a conditioned AP, FB or FT and its willingness to supervise the AP, FB or FT subject to certain conditions imposed by NFA's President or its Membership Committee under these Rules or by the Commission.


                Part 200. Registration Requirements and Procedures

                RULE 201. REGISTRATION REQUIREMENTS AND PROCEDURES.

                [Adopted effective April 4, 1988. Effective dates of amendments: August 3, 1990; April 26, 1993; September 21, 1993; August 1, 1994; June 30, 1998; September 7, 1998; January 6, 1999; September 17, 1999; May 31, 2002;  July 18, 2012; July 9, 2013 and March 21, 2014.]

                NFA shall perform registration functions in accordance with the provisions set forth in these Rules for all persons, except Swap Dealers ("SD"), Major Swap Participants ("MSP"), Floor Trader Firms ("FTF") and principals of SDs, MSPs and FTFs, for whom it has been granted registration responsibilities pursuant to Section 8a(10) or Section 17(o) of the Act. Except as provided below, NFA shall perform registration functions with respect to SDs, MSPs, FTFs and principals of SDs, MSPs and FTFs in accordance with all of the Regulations governing the registration contained in Part 3 of the Commission's Regulations. Rule 203 of these Rules shall govern the registration fees for SDs, MSPs, FTFs and principals of SDs, MSPs and FTFs. Part 500 of these Rules shall govern adverse registration proceedings involving SDs, MSPs, FTFs and principals of SDs, MSPs and FTFs. Part 700 of these Rules shall govern access to and certification of registration records maintained by NFA regarding ATMs, principals of ATMs, ATM APs, SDs, MSPs, FTFs and principals of SDs, MSPs and FTFs. Part 800 shall govern the electronic filing of registration forms by SDs, MSPs, FTFs and principals of SDs, MSPs and FTFs.


                RULE 202. REGISTRATION PROCESSING AND NOTIFICATION OF REGISTRATION OR CONFIRMATION OF EXEMPTION FROM REGISTRATION.

                [Adopted effective April 4, 1988. Effective dates of amendments: September 21, 1993; May 31, 2002; July 21, 2003; and July 18, 2012.]

                (a) If registration has been granted or a temporary license issued under the Act, NFA shall notify the applicant, or the sponsor in the case of an applicant for registration as an AP, and each board of trade designated as a contact market by the Commission that has granted the applicant trading privileges in the case of an applicant for registration as an FB or FT. If an exemption from registration pursuant to CFTC Regulation 30.5 has been confirmed, NFA shall notify the applicant accordingly.

                (b) NFA may provide any notice required by these Rules electronically unless written notice is specifically required. Notices provided electronically shall be complete upon display in NFA's Online Registration System. Notices provided in writing shall be complete upon mailing.

                (c) Any registration form, schedule or supplement thereto, fingerprint card, or other document required by these Rules to be filed with NFA, whether electronically or in hardcopy format, shall be deemed for all purposes to have been filed with, and to be the official record of, the Commission. Part 700 of these Rules governs access to and certification of all such registration records maintained by NFA.


                RULE 203. REGISTRATION FEES.

                [Adopted effective April 4, 1988. Effective dates of amendments: June 8, 1988; January 1, 1990; November 1, 1990; July 1, 1992; April 26, 1993; September 21, 1993; August 1, 1994; January 30, 1997; June 30, 1998; July 1, 2001; May 31, 2002; July 21, 2003; August 1, 2007; January 1, 2008; September 30, 2010; July 18, 2012; July 9, 2013; March 21, 2014; and June 1, 2014]

                (a) Amount. The following fees shall apply:

                  (1) Associated Person and Floor Trader Order Enterer: $85 for each Form 8-R filed for registration as an AP, except that the fee shall be $65 for each Form 8-R filed in accordance with Rule 209, and for each Form 8-R filed for a floor trader order enterer.

                  (2) Futures Commission Merchant: $500 for each Form 7-R filed for registration as an FCM, except a Notice Form 7-R filed pursuant to Rule 204(a)(4)(A).

                  (3) Introducing Broker: $200 for each Form 7-R filed for registration as an IB, except a Notice Form 7-R filed pursuant to Rule 204(a)(4)(A).

                  (4) Commodity Pool Operator and Commodity Trading Advisor: $200 for each Form 7-R filed for registration as a CPO or CTA.

                  (5) Leverage Transaction Merchant: $500 for each Form 7-R filed for registration as an LTM.

                  (6) Floor Broker: $85 for each Form 8-R filed for registration as a FB.

                  (7) Floor Trader: $85 for each Form 8-R filed for registration by an individual as a FT and $200 for each Form 7-R filed by a firm for registration as a FT.

                  (8) Principal: $85 for each Form 8-R filed by a principal of an applicant or registrant, except that the fee shall be $65 for each Form 8-R filed by a principal in accordance with Rule 209. If the principal is also applying for registration as an AP of the applicant or registrant, only the fee required in paragraph (a)(1) of this Rule shall be paid.

                  (9) Annual Registration Records Maintenance Fee: $100 for each registration category as an FCM, RFED, SD, MSP, IB, CPO, CTA or LTM.

                  (10) Late Termination Notice: $100 for each notice required by Rule 214(a) which is filed more than 30 days after the occurrence of the event requiring the notice.

                  (11) Disqualification Fee: $1,000 for the first written submission to the Membership Committee or a designated Subcommittee filed under Rule 504. The fee shall be refunded if the Membership Committee or a designated Subcommittee finds that the applicant or registrant is not subject to a statutory disqualification.

                  (12) Late Disciplinary History Disclosure Fee: $1,000 for non-disclosure of disciplinary history matters on a Form 7-R or a Form 3-R in accordance with Registration Rule 210(c)(1) and $1,000 for non-disclosure of disciplinary history matters on a Form 8-R or a Form 3-R in accordance with Registration Rule 210(c)(2) and (3).

                  (13) Exempt Foreign Introducing Broker, Commodity Pool Operator or Commodity Trading Advisor: $100 for each Form 7-R filed for exemption from registration as an IB, CPO or CTA pursuant to Commission Regulation 30.5.

                  (14) Reinstatement Fee: $500.

                  (15) Retail Foreign Exchange Dealer: $500 for each Form 7-R filed for registration as an RFED.

                  (16) Swap Dealer: $15,000 for each Form 7-R filed for registration as an SD.

                  (17) Major Swap Participant: $15,000 for each Form 7-R filed for registration as an MSP.

                (b) Form of Remittance. Registration fees must be remitted by check, bank draft or money order payable to NFA or by using NFA's Online Registration System Online Deposit function. All registration fees are non-refundable.

                RULE 204. REGISTRATION OF FUTURES COMMISSION MERCHANTS, NOTICE FUTURES COMMISSION MERCHANTS, RETAIL FOREIGN EXCHANGE DEALERS, INTRODUCING BROKERS, NOTICE INTRODUCING BROKERS, COMMODITY POOL OPERATORS, COMMODITY TRADING ADVISORS AND LEVERAGE TRANSACTION MERCHANTS AND CONFIRMATION OF EXEMPTION FROM REGISTRATION PURSUANT TO COMMISSION REGULATION 30.5.

                [Adopted effective April 4, 1998. Effective dates of amendments: June 8, 1988; September 29, 1989; January 1, 1990; July 1, 1992; September 21, 1993; October 5, 1994; June 7, 1996; September 17, 2001; November 17, 2001; May 31, 2002; July 21, 2003; December 15, 2003; August 1, 2007; September 30, 2010; and September 19, 2016.]

                (a) Application for Registration or Exemption from Registration.

                  (1)(A) Each person applying for registration as an FCM, RFED, IB, CPO, CTA or LTM must:

                    (i) file a Form 7-R, completed and filed in accordance with all pertinent instructions;
                    (ii) pay the fee required by Rule 203(a); and
                    (iii) file an Acknowledgement of Conditioned Registration executed by the sponsor if the applicant is subject to a Commission or NFA order imposing conditions on its registration.

                  (B) Each application for registration as an FCM or an IB also must be completed and filed in accordance with CFTC Regulation 1.10.

                  (C) Each application for registration as a CPO also must be completed and filed in accordance with CFTC Regulation 4.13(c).

                  (D) Each application for registration as an LTM also must be completed and filed in accordance with CFTC Regulation 31.13.

                  (E) Each application for registration as an RFED also must be completed and filed in accordance with CFTC Regulation 5.12.

                  (2)(A) Each applicant for registration as an FCM, RFED, IB, CPO, CTA or LTM must have at least one individual principal affiliated with it and for each of its individual principals must:

                    (i) file a Form 8-R completed and filed in accordance with all pertinent instructions;
                    (ii) pay the fee required by Rule 203(a); and
                    (iii) file the fingerprints of each individual principal on a fingerprint card provided by NFA for that purpose, unless the principal qualifies for an exemption from the fingerprinting requirement pursuant to Rule 209.

                  (B) Each individual principal must verify the completeness and accuracy of the information contained in his Form 8-R.

                  (C) The provisions of paragraphs (a)(2)(A)(ii) and (iii) and (a)(2)(B) do not apply to an individual principal who has a current active status at the time the applicant files the individual principal's Form 8-R.

                  (3) When NFA determines that an applicant for registration as an FCM, RFED, IB, CPO, CTA or LTM and all of its principals appear fit for registration, NFA will provide notification to the applicant that the applicant's registration is granted.

                  (4)(A) A broker or dealer that is registered with the Securities and Exchange Commission ("SEC") shall be registered as an FCM or IB upon the filing of a written Notice Form 7-R, completed and filed with NFA in accordance with all pertinent instructions, if: the broker or dealer limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of orders on behalf of others involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or registered derivatives transaction facility, to security futures products as defined in Section 1a(45) of the Act; the registration of the broker or dealer is not suspended pursuant to an order of the SEC; and the broker or dealer is a member of a national securities association registered pursuant to Section 15A of the Securities Exchange Act of 1934 and that membership is not suspended.

                  (B) Such registration shall be terminated immediately if any of the above-stated conditions set for registration in this paragraph are no longer satisfied. The provisions of paragraphs (a)(1)-(3) of this Rule do not apply to applicants filing a Notice Form 7-R in accordance with this paragraph.

                  (5)(A) Each person applying for exemption from registration as a IB, CPO or CTA pursuant to the provisions of CFTC Regulation 30.5 must:

                    (i) file a Form 7-R, completed and filed in accordance with all pertinent instructions;

                    (ii) file the written agreement in the form specified in CFTC Regulation 30.5(a), provided that if the agreement is between the applicant and NFA, the agreement shall be an electronic agreement; and

                    (iii) pay the fee required by Rule 203(a)(13).

                  (B) Each IB, CPO or CTA applying for exemption or confirmed as exempt from registration pursuant to CFTC Regulation 30.5 shall promptly notify NFA in the event that the agreement in paragraph (a)(5)(A) of this Rule is terminated. Each IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 will be deemed to have requested a withdrawal of its confirmation of exemption from registration pursuant to CFTC Regulation 30.5 effective 30 days after the termination of such agreement unless it files a new agreement in accordance with paragraph (a)(5)(A), and NFA shall notify the IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 accordingly.

                (b) Withdrawal of Application. Failure of an applicant to respond to a written or electronic request by NFA for clarification of application information, to resubmit fingerprints of a principal in accordance with such request, or to pay the required registration fees pursuant to Rule 203(a) shall be deemed to constitute a withdrawal of the applicant's Form 7-R and shall result in the immediate termination of an IB applicant's temporary license, and NFA shall notify the applicant accordingly.

                (c) Duration of Registration.

                  (1) A person who becomes registered as an FCM, RFED, IB, CPO, CTA or LTM in accordance with this Rule shall continue to be so registered until the effective date of any revocation or withdrawal of such registration. Such person is prohibited from engaging in activities requiring registration under the Act or from representing himself to be a registrant under the Act or the representative or agent of a registrant during the pendency of any suspension of such registration.

                  (2) A person registered as an IB who was a party to a guarantee agreement with an FCM or an RFED in accordance with CFTC Regulation 1.10(j) will be deemed to have requested a withdrawal of its registration effective 30 days after the termination of such guarantee agreement unless the procedures set forth in CFTC Regulation 1.10(j)(8) are followed.

                (d) Annual Filing and Registration Records Maintenance Fees.

                  (1) On an annual basis, NFA shall send a notice to each FCM, RFED, IB, CPO, CTA, and LTM registered in accordance with paragraph (a)(1) of this Rule advising each that it must electronically file an Annual Registration Update by a specified date. NFA shall also send an invoice to each FCM, RFED, IB, CPO, CTA, and LTM registered in accordance with paragraph (a)(1) of this Rule or confirmed as exempt from registration in accordance with paragraph (a)(5) of this Rule or pursuant to CFTC Regulation 30.10 requesting payment of the annual registration records maintenance fee set forth in Rule 203(a) and any other outstanding registration fees. NFA shall deem the failure to file the Annual Registration Update or to pay the required annual registration records maintenance fee and any other outstanding registration fees within 30 days following the specified date a request to withdraw from registration or to withdraw the confirmation of the exemption pursuant to CFTC Regulation 30.5 or CFTC Regulation 30.10, and shall notify the registrant or IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 or CFTC Regulation 30.10 accordingly.

                  (2) Each FCM, RFED, IB, CPO, CTA, and LTM registered in accordance with paragraph (a)(1) of this Rule or confirmed as exempt from registration in accordance with paragraph (a)(5) of this Rule or pursuant to CFTC Regulation 30.10 whose registration or confirmation of exemption is withdrawn pursuant to this Rule may request, within 60 days of the withdrawal date, to have its registration or confirmation of exemption reinstated. Reinstatement requests received between 30 and 60 days from the withdrawal date are subject to the Reinstatement Fee as set forth in Rule 203(a). Provided that NFA receives all fees, including the required reinstatement fee and the annual registration records maintenance fee as set forth in Rule 203(a), and any other outstanding registration fees within 60 days of the withdrawal date, NFA shall reinstate the registration or confirmation of exemption. If the withdrawal was due in whole or in part to the failure to file the Annual Registration Update, the registration will be reinstated but will be subject to a deemed request to withdraw such registration. The failure to file the Annual Registration Update within 30 days following the reinstatement date shall result in the withdrawal of registration. Only one request for reinstatement may be made annually.


                Rule 205. REGISTRATION OF FLOOR BROKERS AND FLOOR TRADERS.

                [Adopted effective May 31, 2002. Effective dates of amendments: July 18, 2012.]

                (a) Application for Registration.

                  (1) (A) Each individual applying for registration as a FB or FT must:

                    (i) file a Form 8-R, completed and filed in accordance with all pertinent instructions;
                    (ii) pay the registration fee required by Rule 203(a);
                    (iii) file the fingerprints of the applicant on a fingerprint card provided by NFA for that purpose; and
                    (iv) file an Acknowledgement of Conditioned Registration executed by the sponsor if the applicant is subject to a Commission or NFA order imposing conditions on the applicant's registration.

                        (B) The provisions of paragraphs (a)(1)(A)(ii) and (iii) shall not apply to any applicant for registration as a FB or FT who has a current active status at the time the Form 8-R is filed.

                  (2) When NFA determines that an applicant for registration as an FB or FT appears fit for registration and receives satisfactory evidence that a board of trade designated as a contact market by the Commission has granted the applicant trading privileges, NFA will provide notification to the applicant and to each contract market that has granted the applicant trading privileges that the applicant's registration as an FB or FT is granted.

                (b) Withdrawal of Application. Failure of an applicant to respond to a written or electronic request by NFA for clarification of application information, to submit or resubmit fingerprints in accordance with such request, or to pay the required registration fee pursuant to Rule 203(a) shall be deemed to constitute a withdrawal of the applicant's Form 8-R and shall result in the immediate termination of the applicant's temporary license, and NFA shall notify the applicant accordingly and each contract market that has granted the applicant trading privileges.

                (c) Duration of Registration. A person registered as a FB or FT in accordance with this section, and whose registration has neither been revoked nor withdrawn, will continue to be so registered unless such person's trading privileges on all contract markets have ceased: Provided, that if a FB or FT whose trading privileges on all contract markets have ceased for reasons unrelated to any Commission action or any contract market disciplinary proceeding and whose registration is not revoked, suspended or withdrawn is granted trading privileges as a FB or FT, respectively, by any contract market where he held such privileges within the preceding sixty days, such registration as a FB or FT, respectively, shall be deemed to continue and no new application or update need be filed solely on the basis of the resumption of trading privileges. A FB or FT is prohibited from engaging in activities requiring registration under the Act or from representing himself to be a registrant under the Act or the representative or agent of any registrant during the pendency of any suspension of such registration or of all such trading privileges. In accordance with Commission Regulation 3.31(d), each contract market that has granted trading privileges to a person who is registered, or has applied for registration, as a FB or FT, must notify NFA within 60 days after such person's trading privileges on such contract market have ceased.


                RULE 206. REGISTRATION OF ASSOCIATED PERSONS OF FUTURES COMMISSION MERCHANTS, INTRODUCING BROKERS, COMMODITY POOL OPERATORS, COMMODITY TRADING ADVISORS AND LEVERAGE TRANSACTION MERCHANTS.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; September 21, 1993; June 7, 1996; May 31, 2002; September 30, 2010; and November 7, 2010.]

                (a) Application for Registration.

                  (1) (A) Except as provided in Rule 207, the sponsor of each individual applying for registration as an AP of that sponsor must:

                    (i) file a Form 8-R on behalf of the applicant, completed and filed in accordance with all pertinent instructions;
                    (ii) pay the registration fee required by Rule 203(a); and
                    (iii) file the fingerprints of the applicant on a fingerprint card provided by NFA for that purpose.

                  (B) The applicant must verify the completeness and accuracy of information contained in the application that the sponsor files on his behalf.

                  (2) The provisions of paragraphs (a)(1)(A) (ii) and (iii) and (a)(1)(B) of this Rule shall not apply to an applicant who has a current active status at the time the sponsor files his Form 8-R.

                  (3) When NFA determines that an applicant for registration as an AP appears fit for such registration and receives satisfactory evidence that the applicant satisfies the proficiency requirements set forth in Part 400 of these Rules, NFA will provide notification to the applicant's sponsor that the applicant's registration as an AP is granted contingent upon the sponsor hiring or otherwise employing the applicant as an AP within 30 days.

                (b) Special Registration Procedures When Previous Sponsor's Registration Ceases.

                  (1) Any person whose registration as an AP in any capacity was terminated within the preceding 60 days because the previous sponsor's registration was revoked or withdrawn, and who becomes associated with a new sponsor, will be registered as an AP of such new sponsor upon the mailing by that new sponsor to NFA of an Acknowledgement of Conditioned Registration, if applicable, and written certifications stating:

                  (A) that such person has been hired or is otherwise employed by that sponsor;

                  (B) that such person's registration as an AP in any capacity is not suspended or revoked;

                  (C) that such person is eligible to be registered in accordance with this paragraph (b);

                  (D) whether there is pending against such person an adjudicatory proceeding brought under: (i) Sections 6(c), 6(d), 6c, 6d, 8a or 9 of the Act; (ii) CFTC Regulations 3.55 or 3.60; or (iii) NFA or exchange rules or, if within the preceding 12 months, the Commission or NFA has permitted the withdrawal of an application for registration in any capacity after instituting the procedures provided in CFTC Regulation 3.51 or Part 500 of these Rules and, if so, that the sponsor has been given a copy of the notice of the institution of a proceeding in connection therewith;

                  (E) that the new sponsor has received a copy of the notice of the institution of a proceeding if the applicant for registration has certified, in accordance with paragraph (b)(1)(D) of this Rule, that there is a proceeding pending against him as described in that paragraph or that the Commission or NFA has permitted the withdrawal of an application for registration as described in that paragraph;

                  (F) that the Disciplinary Information section of such person's registration application contains no "yes" answers, or none except those arising from a matter which already has been disclosed in connection with a previous application for registration in any capacity if such registration was granted, or which was disclosed more than 30 days previously in an amendment to such application; and

                  (G) that the new sponsor will be responsible for supervising all activities of the person in connection with the sponsor's business as a registrant under the Act.

                  (2) The certifications required by paragraphs (b)(1)(A), (E) and (G) of this Rule must be signed and dated by an officer of the sponsoring corporation, a general partner of the sponsoring partnership or the sponsoring sole proprietor. The certifications required by paragraphs (b)(1)(B), (C), (D) and (F) of this Rule must be signed and dated by the applicant for registration as an AP.

                  (3) Upon receipt of notice from NFA, a person who is registered in accordance with the provisions of paragraph (b)(1) of this Rule shall be required to file with NFA his fingerprints on a fingerprint card provided by NFA for that purpose as well as such other information as NFA may require. NFA may require such a filing every two years or at such greater period of time as it may deem appropriate, after the AP has become associated with a new sponsor in connection with the requirements of paragraph (b)(1) of this Rule.

                (c) Withdrawal of Application. Failure of an applicant or of a sponsor of an applicant to respond to a written or electronic request by NFA for clarification of application information, to submit or resubmit fingerprints in accordance with such request, or to pay the required registration fee pursuant to Rule 203(a)(1) shall be deemed to constitute a withdrawal of the applicant's Form 8-R and shall result in the immediate termination of the applicant's temporary license, and NFA shall notify the sponsor accordingly.

                (d) Duration of Registration. A person registered in accordance with paragraphs (a) or (b) of this Rule, Rule 207 or Rule 301(e) and whose registration has not been revoked, shall continue to be so registered until the revocation or withdrawal of the registration of each of the registrant's sponsors, or until the cessation of the association of the registrant with each of his sponsors. Such person will be prohibited from engaging in activities requiring registration under the Act or from representing himself to be a registrant under the Act or the representative or agent of any registrant during the pendency of any suspension of his or his sponsor's registration. Each of the registrant's sponsors must file a notice in accordance with Rule 214 reporting the termination of the association of the AP.

                (e) Reserved.


                RULE 207. MULTIPLE ASSOCIATIONS.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; September 21, 1993; June 7, 1996; May 31, 2002; September 30, 2010; and July 18, 2012.]

                (a) Except as otherwise provided for in paragraph (d) of this Rule, any person whose application for registration as an AP is pending or who is temporarily licensed or registered as an AP and whose registration is not subject to conditions may become registered as an AP of another sponsor ("new sponsor") if the new sponsor (who must meet the requirements set forth in Rule 509(b)(5)) files a Form 8-R on behalf of the applicant with NFA in accordance with all pertinent instructions.

                (b) (1) The applicant will be registered as an AP of the new sponsor upon the filing of the Form 8-R by the new sponsor in accordance with paragraph (a) of this Rule if the applicant is currently registered as an AP with another sponsor and if:

                  (A) the applicant has satisfied the applicable proficiency requirements in Part 400 of these Rules; or

                  (B) the Form 8-R filed by the new sponsor contains the representation that the applicant has taken one of the examinations to satisfy the applicable proficiency requirements in Part 400 of these Rules.

                (2) NFA shall notify each of the current sponsors of the AP that the AP is applying for registration as an AP with a new sponsor.

                (3) Each sponsor is responsible for supervising the AP. In addition, the new sponsor and each sponsor to whom NFA provides notice of the AP's application for registration with multiple sponsors shall be jointly and severally liable for the conduct of the AP with respect to any customers common to it and any other sponsor of the AP for the:

                  (A) solicitation or acceptance of customer orders; solicitation of funds, securities or property for a participation in a commodity pool;

                  (B) solicitation of a client's or prospective client's discretionary account;

                  (C) solicitation or acceptance of leverage customer orders for leverage transactions; and

                  (D) AP's supervision of any person or persons engaged in any of the foregoing solicitations or acceptances.

                (4) Each sponsor shall remain jointly responsible in accordance with paragraph (b)(3) of this Rule until the individual is no longer associated with the sponsor as an AP and the sponsor files the Form 8-T required by Rule 206(d) and Rule 214 or the individual is no longer associated with multiple sponsors as an AP.

                (c) Upon receipt of notice from NFA, an individual who is simultaneously associated with more than one sponsor in accordance with the provisions of paragraphs (a) and (b) of this Rule shall be required to file with NFA his fingerprints on a fingerprint card provided by NFA for that purpose, as well as such other information as may be required. Such a filing may be required every two years or at such greater period of time as NFA deems appropriate after the AP has become associated with a new sponsor in accordance with the requirements of paragraphs (a) and (b) of this Rule.

                (d) If an individual is associated with an FCM, RFED, or an IB and he directs customers seeking a managed account to use the services of a CTA(s) approved by the FCM, RFED, or IB and all such customers' accounts solicited or accepted by that AP are carried by the FCM or RFED or introduced by the IB with which the AP is associated, such individual shall be deemed to be associated solely with the FCM, RFED, or IB and may not also register as an AP of the CTA(s).

                (e) Any individual seeking an exemption from the requirements of this Rule must file a petition with the Commission in accordance with Commission Regulation 3.12.


                RULE 208. REPORTING OF PRINCIPALS.

                [Adopted effective April 4, 1988. Effective dates of amendments: June 8, 1988; January 1, 1990; September 21, 1993; November 17, 2001; May 31, 2002; September 30, 2010; and July 18, 2012.]

                (a) Unless otherwise provided in this Rule:

                  (1) an applicant for registration as an FCM, RFED, SD, MSP, IB, CPO, CTA or LTM must comply with the provisions of Rule 204(a)(2) for each individual who is a principal of the applicant at the time the applicant files its application for registration; and

                  (2) within 20 days after any person becomes a principal of an applicant or registrant subsequent to the filing of Form 7-R in accordance with Rule 204 ("new principal"), the applicant or registrant must:

                    (A) if the new principal is an entity, file a Form 3-R to add the new principal; or

                    (B) if the new principal is an individual, comply with the provisions of Rule 204(a)(2) for each new principal.

                (b) After a registrant files a Form 3-R or a Form 8-R in accordance with paragraph (a) of this Rule, NFA may notify the registrant that the new principal may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act and that the registrant shall be suspended at such time as NFA issues a notice pursuant to Rule 504 that the registrant is disqualified from registration pursuant to Section 8a(2)(H) or Section 8a(3)(N) and Section 8a(4) of the Act and that its registration may be revoked thereunder. The registrant shall remain suspended pending: (1) a determination by the Membership Committee or its designated Subcommittee that the new principal appears fit to act as a principal of the registrant; or (2) the issuance by the Membership Committee of a Withdrawal of Notice of Intent. However, in no event shall the registrant be suspended pursuant to the provisions of this paragraph for a period exceeding six months.

                (c) If the registrant files a Form 3-R or a Form 8-R for a new principal prior to the new principal becoming affiliated with the registrant in the capacity which requires the listing of such new principal, then any notice issued by NFA pursuant to the provisions of paragraph (b) of this Rule shall not operate to suspend the registrant's registration. The new principal may not become so affiliated with the registrant until: (1) NFA provides notice to the registrant that the new principal appears fit to act as a principal of the registrant; or (2) the Membership Committee or its designated Subcommittee determines that the new principal appears fit to act as a principal of the registrant.


                RULE 209. ALTERNATIVE TO THE FINGERPRINT FILING REQUIREMENT IN CERTAIN CASES.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; September 21, 1993; May 31, 2002; December 17, 2007; September 30, 2010; and July 18, 2012.]

                (a) Any individual who is required by these Rules to submit a fingerprint card is exempt from that requirement if NFA has received a report, record or notation from the Federal Bureau of Investigation within 90 days preceding the date the individual's Form 8-R is filed with NFA.

                (b) Reserved.

                (c) In lieu of submitting a fingerprint card in accordance with the provisions of Rules 204(a)(2) and 208, any FCM, RFED, SD, MSP, IB, CTA, CPO or LTM that has a principal who is a director but is not also an officer or employee of the firm ("outside director") may file with NFA a Notice Pursuant to CFTC Regulation 3.21(c). A firm that has filed a Notice Pursuant to CFTC Regulation 3.21(c) with respect to an outside director described therein must file with NFA on behalf of such outside director a Form 8-R completed in accordance with all pertinent instructions and verified by the outside director. The exemption provided for by this paragraph is limited solely to the outside director's fingerprint requirement and does not affect any other duties or responsibilities of the firm or the outside directors under these Rules. In appropriate cases, NFA may require additional information from the firm with respect to any outside director referred to in the Notice Pursuant to CFTC Regulation 3.21(c).

                (d) Any sponsor that is registered as a Broker/Dealer that files a Form 8-R on behalf of an AP applicant or a principal may, in lieu of submitting a fingerprint card for the applicant or principal, represent in the Form 8-R that, within the last 90 days, an application for registration as a General Securities Representative has been filed on behalf of the applicant with the Financial Industry Regulatory Authority and that a fingerprint card containing the applicant's or principal's fingerprints accompanied the application.


                RULE 210. DEFICIENCIES, INACCURACIES AND CHANGES TO APPLICATION INFORMATION MUST BE REPORTED.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; January 22, 1993; September 21, 1993; May 31, 2002; September 30, 2010; July 18, 2012; and June 1, 2014.]

                (a) Each applicant or registrant as an FCM, RFED, SD, MSP, IB, CPO, CTA, LTM, FB or FT must promptly correct any deficiency or inaccuracy in a Form 7-R or Form 8-R which no longer renders accurate the information contained therein. Each such correction must be made on a Form 3-R and must be completed and filed in accordance with all pertinent instructions. Except when changing to or from a sole proprietorship, an applicant or registrant may file a Form 3-R for purposes of reporting a change in its form of organization. If a Form 3-R is filed to report a change in the applicant's or registrant's form of organization, the newly formed organization will be liable for all obligations of the pre-existing organization which arose out of the Act or the Regulations thereunder. A registrant or applicant that is changing form of organization to or from a sole proprietorship must file a Form 7-R for the newly formed organization and a Form 7-W for the pre-existing organization.

                (b) Each applicant or registrant as an AP and each principal of an applicant or registrant must promptly correct any deficiency or inaccuracy in the Form 8-R which no longer renders current and accurate the information contained therein. Each AP applicant or registrant and each principal must promptly notify his sponsor of any deficiency or inaccuracy and the information necessary to correct it. Each applicant or registrant must promptly correct any deficiency or inaccuracy in its APs' or principals' registration information of which it is or should be aware. Each such correction must be made on a Form 3-R, completed and filed in accordance with all pertinent instructions.

                (c) (1) Each applicant or registrant as an FCM, RFED, SD, MSP, IB, CPO, CTA, LTM or FT shall pay the fee specified in Rule 203(a)(12) for non-disclosure of disciplinary matters on such applicant's Form 7-R and for such registrant's failure to file a Form 3-R to disclose disciplinary matters.

                     (2) The sponsor of each AP applicant or principal shall pay the fee specified in Rule 203(a)(12) for non-disclosure of disciplinary matters on such AP applicant's or principal's verified Form 8-R and for such sponsor's failure to file a Form 3-R to disclose disciplinary matters related to such AP registrant or principal.

                     (3) Each applicant as an FB or FT shall pay the fee specified in Rule 203(a)(12) for non-disclosure of disciplinary matters on such applicant's Form 8-R and for such registrant's failure to file a Form 3-R to disclose disciplinary matters.


                RULE 211. SUPPLEMENTAL FILING REQUIREMENTS.

                [Adopted effective April 4, 1988. Effective dates of amendments: December 10, 1993 and May 31, 2002.]

                Notwithstanding any other provisions of these Rules, NFA may, at any time, give notice to any applicant, registrant or person required to be registered:

                (a)

                  (1) that information has come to the attention of NFA's staff which, if true, could constitute grounds upon which to base a determination that the person is unfit to become or to remain registered in accordance with the Act, the Regulations thereunder, or NFA Rules and which sets forth such information and requests the person to provide evidence mitigating the seriousness of the statutory disqualification set forth in the notice and evidence that the person has undergone rehabilitation; or

                  (2) that NFA has undertaken a routine or periodic review of the registrant's fitness to remain so registered; and

                (b) that such person, or any individual who based upon his relationship with that person is required to file a Form 8-R in accordance with the requirements of these Rules, must, within five days of receipt thereof, or such shorter period of time as NFA may specify, file or cause to be filed a current Form 8-R, completed and filed in accordance with all pertinent instructions, and file or cause to be filed that individual's fingerprints on a fingerprint card provided by NFA for that purpose. Failure to provide the requested information pursuant to this paragraph is a violation of these Rules which in itself constitutes grounds upon which to base a determination that the person is unfit to become or to remain so registered.


                RULE 212. REGISTRATION IN ONE CAPACITY DOES NOT INCLUDE REGISTRATION IN ANY OTHER CAPACITY.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; May 31, 2002; September 30, 2010; and July 18, 2012.]

                (a) Except as may be otherwise provided in the Act or in any Rule, Regulation, or order of the Commission, each AP, FB, FT, FCM, RFED, SD, MSP, IB, CPO, CTA and LTM must register as such under the Act. Registration in one capacity under the Act shall not include registration in any other capacity.

                (b) Except as may be provided in the Act or in any Rule, Regulation or order of the Commission, registration as an AP in one capacity shall not include registration as an AP in any other capacity. An AP sponsored by a registrant which is registered in more than one capacity need register only once to act as an AP of the registrant and shall be deemed to be an AP of such registrant in each such capacity.


                RULE 213. CURRENT ADDRESS FOR PURPOSE OF DELIVERY OF COMMUNICATIONS

                [Adopted effective April 4, 1988. Effective dates of amendments: September 21, 1993 and May 31, 2002.]

                (a) The address of each applicant, registrant and principal, as filed on the Form 7-R or Form 8-R, shall be deemed to be the address for delivery to the applicant, registrant or principal for any communications from the Commission or NFA, including any summons, complaint, reparations claim, arbitration demand, order, subpoena, special call, request for information, notice and other written document or correspondence, unless the applicant, registrant or principal specifies another address for this purpose: Provided, however, that the Commission or NFA may address any correspondence relating to a Form 8-R submitted for or on behalf of a principal to the sponsor with which the principal is affiliated and may address any correspondence relating to the registration of an AP to the sponsor with which the AP or the applicant is or will be associated.

                (b) Each registrant, while registered and for two years after the termination of registration, and each principal, while affiliated with a registrant and for two years after the termination of affiliation, must notify NFA of any change of any of the addresses provided on the Form 7-R or Form 8-R or other address filed with NFA for the purpose of receiving written or electronic communications from the Commission or NFA. Failure to file a required response to any communication sent to the latest such address(es) filed with NFA which is caused by a failure to notify NFA of an address change may result in an order of default and award of claimed monetary damages or other appropriate order in any NFA or Commission proceeding, including a reparations proceeding brought under Part 12 of the Commission's Regulations.


                RULE 214. TERMINATION OF ASSOCIATED PERSON REGISTRATION AND PRINCIPAL AFFILIATION.

                [Adopted effective September 21, 1993. Effective dates of amendments: May 31, 2002; and January 1, 2008.]

                (a) After the filing of a Form 8-R on behalf of any individual for the purpose of permitting that individual to be an AP of a sponsor or a principal affiliated with a sponsor, that sponsor must notify NFA within 30 days after the occurrence of either:

                  (1) the failure of that person to become associated with the sponsor as an AP or affiliated with the sponsor as a principal and, if required, the reasons therefore; or

                  (2) the termination of the association of the AP or the affiliation as a principal with the sponsor and, if required, the reasons therefore.

                (b) Any notice required by paragraph (a) of this Rule must be filed on a Form 8-T. The sponsor must promptly provide a copy of the Form 8-T to the individual whose association or affiliation has been terminated.

                (c) If the notice required by paragraph (a) of this Rule is filed more than 30 days after the occurrence of the event requiring the notice, such notice shall be accompanied by the fee specified in Rule 203(a).


                RULE 215. [RESERVED]


                Part 300. Temporary Licenses

                RULE 301. TEMPORARY LICENSING OF ASSOCIATED PERSONS.

                [Adopted effective April 4, 1988. Effective dates of amendments: June 8, 1988; June 30, 1992; September 21, 1993; June 7, 1996; January 6, 1999 and May 31, 2002.]

                (a) Qualifications.

                  (1) Notwithstanding any other provisions of these Rules, and pursuant to the terms and conditions of this Rule, NFA may grant a temporary license ("TL") to any applicant for registration as an AP whose registration is not suspended or revoked upon the filing with NFA of a properly completed Form 8-R.

                  (2) Temporary Licensing Upon Transfer of Associated Person Registration. Except as provided in Rule 207, NFA shall grant a TL to any applicant for registration as an AP upon the filing of a Form 8-R if as of the date the Form 8-R is filed:

                    (A) the applicant has been hired or is otherwise employed by the sponsor;

                    (B) the applicant's registration with a previous sponsor as an AP has terminated no more than 60 days prior to the date the sponsor files the Form 8-R;

                    (C) the applicant's registration is not revoked or suspended;

                    (D) the new sponsor has received a copy of the notice of the institution of:

                      (i) any pending proceeding that was brought against the applicant under: Sections 6(c), 6(d), 6c, 6d, 8a or 9 of the Act; CFTC Regulations 3.55 or 3.60; or NFA or exchange rules; or
                      (ii) any proceeding that was instituted in accordance with the procedures provided in CFTC Regulation 3.51 or Part 500 of these Rules and, within the prior 12 months, resulted in the Commission or NFA permitting the withdrawal of such person's application for registration in any capacity;

                    (E) if the applicant is subject to a Commission or NFA Order imposing conditions on the applicant's registration, the sponsor meets the requirements set forth in Rule 509(b)(5); and

                    (F) (1) the applicant has satisfied the applicable proficiency requirements in Part 400 of these Rules; or

                  (2) the Form 8-R contains the representation that the applicant has taken one of the examinations to satisfy the applicable proficiency requirements in Part 400 of these Rules.

                (b) Reserved.

                (c) Restrictions Upon Activities.

                An applicant for registration as an AP who has received notification that a TL has been granted may act in the capacity of an AP subject to all CFTC rules, regulations, orders and all NFA requirements.

                (d) Termination of a TL.

                  (1) A TL shall terminate:

                    (A) immediately upon notice to the applicant's sponsor that, within 20 days following the date the TL is issued:

                      (1) NFA has not received the applicant's fingerprint card, if required;

                      (2) the sponsor does not meet the requirements regarding sponsorship of a registrant subject to conditions set forth in Rule 509(b)(5), if applicable;

                      (3) NFA has not received the required registration fee pursuant to Rule 203(a), if required;

                      (4) NFA has not received satisfactory evidence that the applicant has satisfied the applicable proficiency requirements in Part 400 of these Rules, if required; or

                      (5) the applicant has failed to verify the information contained in the Form 8-R, if required;

                    (B) immediately upon termination of the association of the applicant with the registrant which filed the Form 8-R;

                    (C) upon failure of an applicant's sponsor or an applicant to respond to NFA's written or electronic request for clarification of application information or to submit or resubmit fingerprints in accordance with such request;

                    (D) upon the revocation or withdrawal of the registration of the applicant's sponsor; or

                    (E) upon notice to the applicant's sponsor that:

                      (i) the applicant failed to comply with an award in an arbitration proceeding conducted pursuant to CFTC Rule 166.5 within the time permitted for such compliance as specified in Section 10(g) of NFA's Code of Arbitration or the comparable time period specified in the rules of a contract market or other appropriate arbitration forum;
                      (ii) the applicant failed to pay the full amount of a reparations order within the time permitted under Section 14(f) of the Act;
                      (iii) the applicant failed to comply with an order to pay a civil monetary penalty, restitution or disgorgement within the time permitted under Sections 6(e), 6b or 6c(d) of the Act;
                      (iv) the applicant failed to disclose relevant disciplinary information in response to the disciplinary information questions on the Form 8-R; or
                      (v) subsequent to the filing of the Form 8-R, an event has occurred that requires an affirmative response by the applicant to the disciplinary information questions in the Form 8-R; or

                    (F) five days after service upon the applicant of a notice by NFA pursuant to Rule 504 that the applicant may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act.

                      (1) Upon termination of a TL, the applicant may not engage in any activity which requires registration with the Commission as an AP.

                (e) Relationship to Registration and Membership.

                  (1) A TL shall not be deemed to be a registration or to confer any right to such registration.

                  (2) The granting of a TL shall constitute the granting of NFA associate membership if the applicant's sponsor is an NFA Member.

                  (3) Termination of a TL will affect NFA membership as described in Bylaw 301(h).

                  (4) Unless a TL has been terminated, a TL shall become a registration with the Commission upon the earlier of:

                    (A) a determination by NFA that the applicant is qualified for registration as an AP; or

                    (B) the expiration of six months from the date of its issuance unless NFA has issued a notice pursuant to Rule 504 that the applicant may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act.


                RULE 302. TEMPORARY LICENSING FOR GUARANTEED INTRODUCING BROKERS.

                [Adopted effective April 4, 1988. Effective dates of amendments: June 8, 1988; June 30, 1992; September 21, 1993; June 7, 1996; April 1, 1997; January 6, 1999; November 17, 2001; May 31, 2002; and September 30, 2010.]

                (a) Qualifications. Notwithstanding any other provisions of these Rules, and pursuant to the terms and conditions of this Rule, NFA may grant a TL to any applicant for registration as an IB. To be eligible for a TL:

                  (1) the IB must file with NFA:

                    (A) A Form 7-R completed and filed in accordance with all pertinent instructions;

                    (B) For each individual principal:

                      (i) a Form 8-R completed and filed in accordance with all pertinent instructions;
                      (ii) Legible fingerprints of the applicant, if a sole proprietor, and of each individual principal of the applicant on a fingerprint card provided by NFA for that purpose, unless the sole proprietor or principal has a current active status;
                      (iii) the registration fees required by Rule 203(a) for the applicant and, if applicable, its individual principals; and

                    (C) All other properly completed forms and documents that are required to become registered as an IB and to become an NFA Member.

                  (2) If an FCM will be the guarantor it:

                    (A) must be eligible in accordance with all NFA Requirements to enter into such an agreement;

                    (B) must file with NFA:

                      (i) a properly completed guarantee agreement (Form 1-FR Part B);
                      (ii) a certification stating that to the best of the FCM's knowledge, information, and belief, all of the publicly available information supplied by the applicant and its principals on the Forms 7-R and 8-R is accurate and complete;
                      (iii) and if the IB's registration is subject to conditions, an Acknowledgement of Conditioned Registration signed by the FCM (who must meet the requirements set forth in Rule 509(b)(5)) that contains all of the conditions required by the order imposing them;

                  (3) If an RFED will be the guarantor it:

                    (A) must be eligible in accordance with all NFA Requirements to enter into such an agreement;

                    (B) must file with NFA:

                      (i) a properly completed guarantee agreement (Form 1-FR Part B);

                      (ii) a certification stating that to the best of the RFED's knowledge, information, and belief, all of the publicly available information supplied by the applicant and its principals on the Forms 7-R and 8-R is accurate and complete;
                      (iii) and if the IB's registration is subject to conditions, an Acknowledgement of Conditioned Registration signed by the RFED (who must meet the requirements set forth in Rule 509(b)(5)) that contains all of the conditions required by the order imposing them;

                  (4) At least one principal of the IB is an applicant for registration as an AP of the IB or is a registered FB;

                  (5) Each principal who is an individual must meet the eligibility requirements for a TL in any capacity; and

                  (6) NFA has received satisfactory evidence that each principal who is applying for registration as an AP of the IB satisfies the proficiency requirements contained in Part 400 of these Rules.

                (b) A guarantee agreement filed in connection with paragraph (a)(2)(B)(i) or (a)(3)(B)(i) of this Rule shall become effective upon the granting of the TL.

                (c) Restrictions Upon Activities.

                  (1) An applicant for registration as an IB who has received notification from NFA that a TL has been granted may act in the capacity of an IB, subject to all CFTC rules, regulations, orders, and all NFA requirements.

                  (2) An applicant for registration as an IB who has received a TL may be guaranteed by an FCM or RFED other than the FCM or RFED which provided the initial guarantee agreement described in paragraph (a)(2)(B)(i) or (a)(3)(B)(i) of this Rule if the IB submits to NFA:

                    (i) written notice of the termination of the initial guarantee agreement; and
                    (ii) a properly completed new guarantee agreement (Form 1-FR Part B) which will become effective the day following the last effective date of the initial guarantee agreement.

                Such written notice and new guarantee agreement must be submitted to NFA 10 days prior to the termination of the initial guarantee agreement or within such other period of time as NFA may allow for good cause shown, in accordance with NFA Requirements and CFTC Regulations 1.10(j)(4)(ii), (j)(6).

                (d) Termination of a Temporary License.

                  (1) A TL shall terminate:

                    (A) five (5) days after service upon the applicant of a notice by NFA pursuant to Rule 504 that the applicant may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act;

                    (B) upon the revocation or withdrawal of the guarantor FCM's or RFED's registration;

                    (C) immediately upon termination of the applicant's guarantee agreement in accordance with NFA Requirements and CFTC Regulations 1.10(j)(4)(ii), (j)(6) unless a new guarantee agreement is filed in accordance with paragraph (c)(2) of this Rule;

                    (D) upon failure of an applicant:

                      (i) to respond to NFA's request for clarification of application information;
                      (ii) to pay the registration fees pursuant to Rule 203(a) for the applicant or, if required, its principals; or
                      (iii) to submit or resubmit fingerprints in accordance with such request;

                    (E) whenever a person not listed as a principal on the applicant's registration application becomes a principal of the applicant after the TL is granted if the TL would not have been granted to the applicant had the applicant filed a Form 8-R for the principal prior to the TL being granted; or

                    (F) upon notice to the applicant and its guarantor FCM or RFED that:

                      (i) the applicant failed to comply with an award in an arbitration proceeding conducted pursuant to CFTC Rule 166.5 within the time permitted for such compliance as specified in Section 10(g) of NFA's Code of Arbitration or the comparable time period specified in the rules of a contract market or other appropriate arbitration forum;
                      (ii) the applicant failed to pay the full amount of a reparations order within the time permitted under Section 14(f) of the Act;
                      (iii) the applicant failed to comply with an order to pay a civil monetary penalty, restitution or disgorgement within the time permitted under Sections 6(e), 6b or 6c(d)of the Act;
                      (iv) the applicant failed to disclose relevant disciplinary information in response to the disciplinary information questions on the Form 7-R;
                      (v) any principal of the applicant failed to disclose relevant disciplinary information in response to the disciplinary information questions on the Form 8-R; or
                      (vi) subsequent to the filing of the applicant's Form 7-R or any principal's Form 8-R, an event has occurred leading to an affirmative response to the disciplinary information questions on the applicant's Form 7-R or on any principal's Form 8-R.

                  (2) Upon termination of a TL, the applicant may not engage in any activity which requires registration with the Commission as an IB.

                (e) Relationship to Registration and Membership.

                  (1) A TL shall not be deemed to be a registration or to confer any right to such registration.

                  (2) The granting of a TL shall constitute the granting of NFA membership.

                  (3) Termination of a TL will affect NFA membership as described in Bylaw 301(h).

                  (4) Unless a TL has been terminated, a TL shall become a registration with the Commission upon the earlier of:

                    (A) a determination by NFA that the applicant is qualified for registration as an IB; or

                    (B) the expiration of six months from the date of its issuance unless NFA has issued a notice pursuant to Rule 504 that the applicant may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act.

                (f) Retention of Records. In accordance with Commission Regulation 1.31, the guarantor FCM or RFED must retain such records as are necessary to support the certification required by this Rule.


                RULE 303. TEMPORARY LICENSING FOR FLOOR BROKERS AND FLOOR TRADERS

                [Adopted effective January 6, 1999. Effective dates of amendments: May 31, 2002; and July 18, 2012.]

                (a) Qualifications. Notwithstanding any other provision of these Rules, and pursuant to the terms and conditions of this Rule, NFA may grant a TL to any applicant for registration as a FB or FT upon the filing with NFA of:

                  (1) a Form 8-R completed and filed in accordance with all pertinent instructions;

                  (2) the fingerprints of the applicant on a fingerprint card provided by NFA for that purpose, if required;

                  (3) the registration fee by Rule 203(a), if applicable;

                  (4) if the applicant is subject to a Commission or NFA order imposing conditions on the applicant's registration, an Acknowledgement of Conditioned Registration executed by a sponsor that meets the requirements contained in Rule 509(b)(5); and

                  (5) receipt by NFA of satisfactory evidence that the applicant has been granted trading privileges by a contract market that has filed with NFA a certification signed by its chief operating officer with respect to the review of an applicant's employment, credit and other history in connection with the granting of trading privileges.

                (b) Reserved.

                (c) Restrictions Upon Activities. An applicant for registration as a FB who has received notification that a TL has been granted may act in the capacity of a FB. An applicant for registration as a FT who has received notification that a TL has been granted may act in the capacity of a FT. Any temporarily licensed applicant acting in the capacity of a FT or FB shall be subject to all Commission rules, regulations and orders.

                (d) Termination of a Temporary License.

                  (1) A TL shall terminate:

                    (A) five days after service of a notice by NFA pursuant to Rule 504 that the applicant may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act;

                    (B) immediately upon notification to the temporarily licensed applicant that the sponsor who filed the Acknowledgement of Conditioned Registration described in paragraph (a)(1)(D) of this Rule has terminated the sponsorship relationship;

                    (C) upon failure of an applicant's sponsor or an applicant to respond to NFA's request for clarification of application information, to pay the required fee pursuant to Rule 203(a) or to submit or resubmit fingerprints in accordance with such request;

                    (D) immediately upon revocation or withdrawal of the applicant's sponsor;

                    (E) immediately upon loss of trading privileges on all contract markets that filed the certification described in Commission Regulation 3.40(a)(2)(iv) that granted such privileges;

                    (F) upon notice to the applicant or the contract market that has granted the applicant trading privileges that:

                      (i) the applicant has failed to comply with an award in an arbitration proceeding conducted pursuant to Commission Rule 166.5 within the time permitted for such compliance as specified in Section 10(g) of NFA's Code of Arbitration or the comparable time period specified in the rules of a contract market or other appropriate arbitration forum;
                      (ii) the applicant failed to pay the full amount of a reparations order within the time permitted under Section 14(f) of the Act;
                      (iii) the applicant failed to comply with an order to pay a civil monetary penalty, restitution or disgorgement within the time permitted under Sections 6(e), 6b or 6c(d) of the Act;
                      (iv) the applicant failed to disclose relevant disciplinary information in response to the disciplinary information questions on the Form 8-R; or
                      (v) subsequent to the filing of the Form 8-R, an event has occurred leading to an affirmative response to the disciplinary information questions on the applicant's Form 8-R.

                  (2) Upon termination of a TL, the applicant may not engage in any activity that requires registration with the Commission as a FB or FT.

                (e) Relationship to Registration.

                  (1) A TL shall not be deemed to be a registration or to confer any right to such registration.

                  (2) Unless a TL has been terminated, a TL shall become a registration with the Commission upon the earlier of:

                  (A) a determination by NFA that the applicant is qualified for registration as a FB or FT; or

                  (B) the expiration of six months from the date of its issuance unless NFA has issued a notice pursuant to Rule 504 that the applicant may be disqualified from registration under Sections 8a(2) through 8a(4) of the Act.


                Part 400. Proficiency Requirements

                RULE 401. QUALIFICATION TESTING REQUIREMENT.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; August 11, 1993; September 21, 1993; May 4, 1994; July 28, 1995; October 6, 1997; May 31, 2002; September 9, 2002; December 31, 2005; December 17, 2007; September 30, 2010; October 3, 2012; and February 21, 2013.]

                (a) Except as provided elsewhere in this Rule, any individual applying to become a Member of NFA as an FCM, an RFED, an IB, a CPO, a CTA, an LTM, or for registration under the Act as an AP of any of the foregoing, or applying for registration with NFA as an Associate pursuant to NFA Bylaw 301(b) shall not be granted NFA membership, registered under the Act as an AP, or registered as an Associate Member of NFA unless:

                  (1) NFA has received satisfactory evidence that the applicant has taken and passed the National Commodity Futures Examination (Series 3) on a date which is no more than two years prior to the date the application is received by NFA; or

                  (2) NFA has received satisfactory evidence that the applicant has taken and passed the National Commodity Futures Examination (Series 3) and since the date the applicant last passed such examination, there has been no period of two consecutive years during which the applicant has not been either registered as a FB, AP or principal of an FCM, RFED, IB, CTA, CPO or LTM.

                (b) Notwithstanding the provisions of Rule 401(a), a person applying to be registered as an AP will satisfy the proficiency requirements of this Rule if:

                  (1) the applicant currently is registered with the Financial Industry Regulatory Authority, as a General Securities Representative ("GSR") of the sponsor; and

                  (2) the applicant's sole activities, subject to regulation by the Commission, are and will continue to be limited to referring clients to an AP of the sponsor who has satisfied the proficiency requirements set forth in this Rule, provided that the applicant's referral of clients is solely incidental to his business as a GSR of the sponsor; or the supervision on behalf of the sponsor of persons whose activities are so limited.

                (c) Notwithstanding the provisions of Rule 401(a), a person applying to be registered as an AP will satisfy the proficiency requirements of this Rule if:

                  (1) NFA receives satisfactory evidence the applicant has taken and passed the Futures Managed Funds Examination (Series 31) on a date which is no more than two years prior to the date the application is received by NFA; or

                  (2) NFA has received satisfactory evidence that the applicant has taken and passed the Futures Managed Fund Examination (Series 31) and since the date the applicant last passed such examination, there has been no period of two consecutive years during which the applicant has not been either registered as an FB, AP or principal of an FCM, IB, CTA, CPO or LTM; and

                  (3) the applicant currently is registered with the Financial Industry Regulatory Authority, as a GSR of the sponsor; and

                  (4) the applicant's sole activities, subject to regulation by the Commission, are and will continue to be limited to the solicitation on behalf of the sponsor of funds, securities, or property for participation in a commodity pool, the solicitation on behalf of the sponsor of clients to open discretionary accounts to be managed by registered CTAs, or the supervision on behalf of the sponsor of persons whose activities are so limited.

                (d) Notwithstanding the provisions of Rule 401(a), a person applying to be registered as an AP will satisfy the proficiency requirements of this Rule if:

                  (1) NFA has received satisfactory evidence that the applicant has taken and passed the Financial Instruments Examination (Series 33) and since the date the applicant last passed such examination, there has been no period of two consecutive years during which the applicant has not been either registered as an AP or a principal of an FCM, IB, CTA, CPO or LTM; and

                  (2) the applicant currently is registered with the Financial Industry Regulatory Authority, as a GSR of the sponsor; and

                  (3) the applicant's sole activities, subject to regulation by the Commission, are and will continue to be limited to the solicitation or acceptance on behalf of the sponsor of customer orders for futures or options involving stock index, currency or interest rate products, or security futures products or the supervision on behalf of the sponsor of persons whose activities are so limited.

                (e) Notwithstanding the provisions of Rule 401(a), a person applying to be registered as an AP will satisfy the proficiency requirements of this Rule if the applicant's sole activities, subject to regulation by the Commission, are and will continue to be limited to:

                  (1) the solicitation or acceptance on behalf of the sponsor of orders for swaps subject to the jurisdiction of the CFTC;

                  (2) solicitation on behalf of the sponsor of funds, securities, or property for participation in a commodity pool that:

                    (i) exclusively trades swaps subject to the jurisdiction of the CFTC; or

                    (ii) trades swaps subject to the jurisdiction of the CFTC in a commodity pool and the sponsor has been granted or is seeking a waiver from the Series 3 for its APs on the basis that but for the trading of swaps it would be eligible for the exclusion under CFTC Regulation 4.5(c)(2)(iii)(A) or (B) or the exemption under CFTC Regulation 4.13(a)(3).

                  (3) the solicitation on behalf of the sponsor of clients to open discretionary accounts that exclusively trade swaps subject to the jurisdiction of the CFTC to be managed by registered CTAs or providing advice on behalf of the sponsor to a commodity pool described in subsection 2(i) or (ii) above; or

                  (4) the supervision on behalf of the sponsor of persons whose activities are so limited.

                (f) Notwithstanding the provisions of Rule 401(a), any individual applying to become a Member of NFA as an FCM, an RFED, an IB, a CPO, a CTA, an LTM, or for registration under the Act as an AP of any of the foregoing, or applying for registration with NFA as an Associate pursuant to NFA Bylaw 301(b), will satisfy the proficiency requirements of this Rule if:

                  (1) the applicant is or within the past two years has been registered or licensed in a jurisdiction outside the United States;

                  (2) the applicant has satisfied the proficiency requirements in that foreign jurisdiction and the Board of Directors has designated those proficiency requirements as an appropriate substitute for the market fundamentals portion of the National Commodity Futures Examination (Series 3); and

                  (3) NFA has received satisfactory evidence that the applicant has taken and passed the Limited Futures Examination-Regulation (Series 32) on a date which is no more than two years prior to the date the application is received by NFA; or

                  (4) NFA has received satisfactory evidence that the applicant has taken and passed the Limited Futures Examination-Regulation (Series 32) and since the date the applicant last passed such examination, there has been no period of two consecutive years during which the applicant has not been either registered as an AP or a principal of an FCM, RFED, IB, CTA, CPO or LTM.

                (g) The applicant's sponsor must supervise the applicant's compliance with the limitations on the applicant's activities set forth in paragraphs (b)-(d) of this Rule. Any failure of the applicant to adhere to such limitations may be cause for, among other things, disciplinary action by NFA against the sponsor for violation of NFA Compliance Rule 2-9. The limitations set forth in paragraphs (b)-(d) of this Rule shall remain in effect until the applicant or the applicant's sponsor submits to NFA satisfactory evidence of having taken and passed the National Commodity Futures Examination (Series 3).

                (h) An individual may contemporaneously engage in any activity permitted pursuant to the provisions of paragraphs (b)(2), (c)(4) and (d)(3) provided that the individual meets the other pertinent requirements of paragraphs (b)-(d).

                (i) Willfully making any materially false or misleading statement or willfully omitting to state any material fact in any part of the application for registration, including information concerning the requirements of this Rule, is cause for denial, suspension, or revocation of registration and criminal prosecution.


                RULE 402. WAIVER OF TESTING REQUIREMENT.

                [Adopted effective August 1, 1992. Effective dates of amendments: September 21, 1993; May 31, 2002; December 15, 2004; and October 3, 2012.]

                The Vice-President of Registration and Membership may waive the requirements of Rule 401 under circumstances approved by the Board of Directors. The decision of the Vice-President of Registration and Membership shall be final. Any sponsor which has been granted a waiver with respect to its APs that becomes ineligible for such waiver shall promptly notify the Vice-President of Registration and Membership in writing of such ineligibility.


                Part 500. Proceedings to Deny, Condition, Suspend and Revoke Registration

                RULE 501. AUTHORITY TO DENY, CONDITION, SUSPEND AND REVOKE REGISTRATION.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; September 30, 1992; December 10, 1993; August 1, 1994; September 7, 1998; March 12, 1999; July 1, 2001, December 15, 2004; November 18, 2009; September 30, 2010; November 7, 2010; July 18, 2012; and July 9, 2013.]

                NFA may refuse to register or register conditionally any person registered or applying for registration as an FCM, RFED, IB, CPO, CTA, LTM, as an AP of any of the foregoing, as an SD or MSP, or as a floor broker or floor trader, or suspend or revoke the registration of any registrant in those categories, based upon the standards of fitness set forth in the Act. Interim Orders and Final Orders denying, revoking, conditioning, or suspending registration shall be made by the Membership Committee or a designated Subcommittee in accordance with the procedures set forth in Part 500 of these Rules. Such designated Subcommittee shall consist of one member of the Membership Committee and two members of NFA's Hearing Committee for all categories except floor brokers and floor traders and SDs or MSPs. The designated Subcommittee for floor brokers/floor traders shall consist of three persons, one of whom is a member of the Membership Committee, one of whom is a member of NFA's Hearing Committee and one of whom is a registered floor broker or floor trader approved by NFA's Board of Directors to be a member of such Subcommittee. The designated Subcommittee for SDs or MSPs shall consist of one member of the Membership Committee and two members of NFA's Hearing Committee, one of whom is an employee of an SD or MSP Member of NFA. The member of the Membership Committee sitting on each designated Subcommittee shall serve as the Chairman of the designated Subcommittee. At least one of the members on each designated Subcommittee shall not be an NFA Member or an Associate or an employee of an NFA Member. In cases submitted by the President to the Membership Committee or a designated Subcommittee, registration shall not be granted pending a final determination by the Membership Committee or a designated Subcommittee. No member of the Membership Committee or a designated Subcommittee shall either review a registration matter or participate in a registration action if the member, or any person with whom the member is connected, has a financial, personal or other direct interest in the matter under consideration or is disqualified under Bylaw 708(c).

                 


                RULE 502. GENERAL PROVISIONS.

                [Adopted effective April 4, 1988. Effective dates of amendments: December 10, 1993; August 1, 1994; July 1, 2001; June 8, 2007; December 10, 2007; and September 30, 2010.]

                (a) For purposes of any proceeding to deny, condition, suspend, or revoke registration, service upon an applicant or registrant will be sufficient if mailed by certified mail return receipt requested, delivered to a generally recognized overnight courier service or delivered to a messenger service, properly addressed to the applicant or registrant at the address shown on his most recent registration application or any amendment thereto. Service will be complete upon mailing, delivery to a generally recognized overnight courier service or delivery to a messenger service. Where a party effects service by mail, the time within which the person served may respond thereto shall be increased by three days.

                (b) A copy of any notice served in accordance with paragraph (a)(1) of this Rule shall also be served upon:

                  (1) any sponsor of the applicant or registrant, if the applicant or registrant is an individual registered as or applying for registration as an AP and such sponsor's guarantor, if any; or

                  (2) any FCM which has entered into a guarantee agreement pursuant to CFTC Regulation 1.10(j) with an applicant or registrant applying for registration as or registered as an IB; or

                  (3) any RFED which has entered into a guarantee agreement pursuant to CFTC Regulation 1.10(j) with an applicant or registrant applying for registration as, or registered as, an IB; or

                  (4) any contract market that has granted or is reviewing an application for trading privileges if the applicant or registrant is an individual registered as or applying for registration as a floor broker or floor trader.

                (c) Documents served by an applicant or registrant upon NFA under this Part 500 shall be considered served or filed only upon actual receipt by the Legal Docketing Department of National Futures Association, 300 South Riverside Plaza, Chicago, Illinois 60606.

                (d) Documents may also be served facsimile to the attention of the Legal Docketing Department or by email to Docketing@nfa.futures.org. Parties who file documents by electronic means thereby consent to accept service of pleadings in the proceedings by the same method and waive any objection based on authenticity and genuineness to the use and admissibility into evidence in the proceeding of any document that they file by electronic means. The first document that a party files by electronic means must identify that party's e-mail address or facsimile number at which NFA may serve pleadings in the proceeding. Parties who provide an e-mail address or facsimile number must advise Legal Docketing of any change to the e-mail address or facsimile number.

                (e) Except as otherwise provided by law or these Rules, for good cause shown, the Membership Committee or a designated Subcommittee before whom a proceeding brought under these Part 500 Rules is then pending, on their own motion or motion of a party, may at any time extend or shorten the time limit prescribed by such Rules for filing any document. In any instance in which a time limit is not prescribed for an action to be taken concerning any matter, the Membership Committee or a designated Subcommittee may set a time limit for that action.


                RULE 503. WITHDRAWAL OF APPLICATION FOR REGISTRATION.

                [Adopted effective April 4, 1988. Effective dates of amendments: December 10, 1993 and December 15, 2004.]

                (a) Whenever information comes to the attention of NFA that an applicant for registration in any capacity may be disqualified from registration under Section 8a(2), 8a(3) or 8a(4) of the Act, the Vice President of Registration and Membership or the Vice President's designee may serve written notice upon the applicant which shall specify the statutory disqualifications to which the applicant may be subject and notify the applicant that:

                  (1) the information, if true, is a basis upon which the applicant's registration may be denied;

                  (2) unless the applicant voluntarily withdraws his application, it may be necessary to institute the denial procedures described in Part 500 of these Rules; and

                  (3) if the applicant does not confirm in writing that he wishes to have his application given further consideration, his application will be deemed to have been withdrawn.

                (b) The applicant must serve the written confirmation referred to in paragraph (a)(3) of this Rule upon NFA's Legal Docketing Department within 20 days of the date the written notice from NFA was served.


                RULE 504. PROCEDURES GOVERNING APPLICANTS AND REGISTRANTS DISQUALIFIED FROM REGISTRATION UNDER SECTION 8a(2), 8a(3) OR 8a(4) OF THE ACT.

                [Adopted effective April 4, 1988. Effective dates of amendments: January 1, 1990; December 10, 1993; August 1, 1994; July 1, 2001; April 2, 2004; December 15, 2004; March 6, 2009; and November 7, 2010.]

                (a) Notice of Intent. On the basis of information which NFA has obtained, the President of NFA may at any time serve a Notice of Intent upon any person registered or applying for registration in any capacity, stating that:

                  (1) NFA alleges and is prepared to prove that the applicant or registrant is subject to one or more of the statutory disqualifications set forth in Section 8a(2), 8a(3) or 8a(4) of the Act;

                  (2) the allegations set forth in the Notice of Intent, if true, constitute a basis upon which registration can be denied, conditioned, suspended or revoked (if the Notice of Intent proposes conditioning registration, the Notice shall specify the proposed conditions );

                  (3) the applicant or registrant is entitled to have the Membership Committee or a designated Subcommittee considers written evidence of the type set forth in paragraph (f) of this Rule. The Notice of Intent shall inform the applicant or registrant of the procedures which will be followed if no written submission is made in accordance with this Rule; and

                  (4) if an applicant for registration has been granted a temporary license, such temporary license shall terminate five days after service on the applicant of the Notice of Intent.

                (b) Written Response to the Notice of Intent.

                  (1) In response to a Notice of Intent alleging a disqualification from registration set forth in Section 8a(2), 8a(3) or 8a(4) of the Act, the applicant or registrant may submit a written response challenging the accuracy of the allegations establishing the statutory disqualification, including evidence as to:

                    (A) the applicant's or registrant's identity;

                    (B) the existence of a clerical error in any record documenting the statutory disqualification;

                    (C) the nature or date of the statutory disqualification;

                    (D) the post-conviction modification of any record of conviction; or

                    (E) the favorable disposition of any appeal.

                  (2) The applicant or registrant shall state the nature of each challenge in the response and submit an affidavit to support facts material to each challenge. In the response, the applicant or registrant also shall state whether he intends to show that, notwithstanding the accuracy of the allegations set forth in the Notice of Intent, his registration would pose no substantial risk to the public.

                  (3) Time for Filing of Response. A written response to the Notice of Intent must be served upon NFA's Legal Docketing Department within 20 days of the date of the service of the Notice of Intent upon the applicant or registrant. All applicants and registrants must include the disqualification fee required by Rule 203(a)(11) with their response.

                  (4) Default of Applicant or Registrant to Notice of Intent. If the applicant or registrant fails to file a timely written response to the Notice of Intent, the applicant or registrant shall be deemed to have waived his right to submit such written response, and the facts stated in the Notice of Intent shall be deemed to be true for the purpose of finding that the applicant or registrant is disqualified from registration under Section 8a(2), 8a(3) or 8a(4) of the Act. The Membership Committee or a designated Subcommittee shall thereafter, after a finding that service was properly effected in accordance with Rule 502, enter a Final Order denying, conditioning, suspending or revoking the registration. Such finding shall be based upon the evidence of the statutory disqualification and the Notice of Intent with proof of service. In order to prevent injustice and on such conditions as may be appropriate, the Membership Committee or a designated Subcommittee may set aside a default order. Any motion to set aside a default shall be made within a reasonable time, shall state the reasons for the failure to file and shall specify the nature of the proposed defense.

                (c) Reply to Response of a Registrant Subject to an 8a(2) Disqualification. If a registrant who is alleged to be subject to an 8a(2) disqualification submits a written response, challenging the accuracy of the allegations establishing the statutory disqualification, the Vice President of Registration and Membership may submit a written reply to the Membership Committee or a designated Subcommittee and serve such reply upon the registrant within 10 days of the date of such written response. The reply shall include evidence establishing the existence of the statutory disqualification.

                (d) Interim Order. After the receipt of a registrant's written response to the Notice of Intent and any reply thereto from the Vice President of Registration and Membership, the Membership Committee or a designated Subcommittee shall determine whether the registrant is disqualified from registration under Section 8a(2) of the Act.

                  (1) If the Membership Committee or a designated Subcommittee determines that the registrant is disqualified under Section 8a(2) of the Act, the Membership Committee or a designated Subcommittee, within 30 days after receipt of the registrant's written response, if any, and any reply thereto, shall issue an interim order suspending the registration of the registrant. The interim order shall inform the registrant that the registration of the registrant shall be suspended, effective five days after the interim order is served upon the registrant, and such suspension shall remain in effect until a Final Order has been issued. In no event shall the registrant be suspended for a period to exceed six months.

                  (2) If the Membership Committee or a designated Subcommittee determines that the registrant is not disqualified from registration under Section 8a(2) of the Act, the Membership Committee or a designated Subcommittee shall, within 30 days after receipt of the registrant's written response and any reply thereto, either issue a Withdrawal of Notice of Intent or, if the Membership Committee or a designated Subcommittee determines that the disqualification constitutes a Section 8a(3) disqualification, it may grant the Vice President leave to file an Amended Notice of Intent within thirty days. In either event, the Membership Committee or a designated Subcommittee shall make a finding that the registrant is not disqualified under Section 8a(2) of the Act.

                  (3) If the Membership Committee or a designated Subcommittee determines that there is not enough evidence in the written record to decide whether the registrant should be disqualified from registration under Section 8a(2) of the Act, the Membership Committee or a designated Subcommittee may, within 30 days after receipt of the registrant's written response and any reply thereto, either decline to make a finding or issue an order for an oral hearing. The Membership Committee or a designated Subcommittee shall rely upon any evidence produced at an oral hearing and any written submissions to make the determination required in paragraphs (d)(1) or (d)(2) of this Rule.

                (e) Oral Hearing. Within 30 days of the date the applicant or registrant files its response to the Notice of Intent, NFA shall notify the applicant or registrant of the time and place of a hearing. At such hearing, the parties shall be limited in their case-in-chief to presentation of witnesses and documents listed in their submissions as described in (f) and (g) below, except for good cause shown.

                (f) Respondent's Witnesses and Evidence. If, in response to the Notice of Intent, the applicant or registrant states that he intends to make the showing referred to in paragraph (b)(2) of this Rule, he shall, at least 30 days before the date of the hearing, file with NFA's Legal Docketing Department a statement of the applicant or registrant or his attorney identifying and summarizing the testimony of each witness whom the applicant or registrant intends to have testify in support of facts material to his showing. Such submission also must include copies of all documents which the applicant or registrant intends to introduce to support facts material to his showing. In making a showing pursuant to paragraph (b)(2) of this Rule, the applicant or registrant may present:

                  (1) mitigating evidence relating to the facts and circumstances surrounding the disqualifying conduct;

                  (2) evidence of rehabilitation since the disqualifying conduct; and

                  (3) evidence that the applicant's or registrant's registration would be subject to supervisory controls, including proposed conditions likely to detect future wrongdoing by the applicant or registrant and protect the public from any harm arising from such future wrongdoing.

                (g) NFA's Witnesses and Evidence. At least 15 days before the date of the hearing the Vice President of Registration and Membership shall serve, on the applicant or registrant a description of the factual issues raised in the applicant's or registrant's response and further submission, if any, that NFA regards as material and disputed. Such reply also shall include the identity and a summary of the expected testimony of each witness whom NFA intends to have testify at its case-in-chief and copies of all documents which NFA intends to introduce at such hearing.

                (h) Termination. In the event that an applicant or registrant's pending or current registration is terminated after the issuance of a Notice of Intent but prior to the effective date of a Final Order, the Membership Committee or a designated Subcommittee may issue a Withdrawal of Notice of Intent indicating that because the applicant or registrant is no longer registered or pending registration, further proceedings are not warranted.


                RULE 505. MOTIONS.

                [Adopted effective July 1, 2001.]

                (a) All motions shall be in writing and served in accordance with these Rules. The Chairman of the Subcommittee may decide all pre-hearing motions concerning deadlines, location of the hearing, continuances, and requests for telephonic or video testimony. All other motions shall be decided by the full Subcommittee.

                (b) NFA may, at any time, make a motion for summary judgment stating that, based upon the respondent's response and further submission, if any, and any other materials that are attached to the response, there are no issues of material fact to be determined and that registration should be denied or revoked.

                (c) Both NFA and the respondent have a right to respond to any motion within ten days of service of the motion.


                RULE 506. HEARING PROCEDURES.

                [Adopted effective April 4, 1988. Effective dates of amendments: December 10, 1993 and August 1, 1994.]

                (a) When a hearing is held before the Membership Committee or a designated Subcommittee, a record of the hearing shall be kept. At such hearing, the applicant or registrant may be represented by counsel, submit evidence, call and examine witnesses, examine the evidence upon which the Membership Committee or a designated Subcommittee made a determination as well as any documentary evidence which NFA intends to present at the hearing and, at the discretion of the Membership Committee or a designated Subcommittee, present oral or written argument.

                (b) Upon notice of the time and place of an oral hearing, the parties may elect to participate by telephone. To effect such an election, a party shall file a notice with NFA's Legal Docketing Department and serve a copy on all opposing parties within 15 days of the date such notice is served. The filing of an election to participate by telephone will be deemed a waiver of the party's right to a full oral hearing on the parties' material disputes of fact. The Membership Committee or a designated Subcommittee shall order a telephonic hearing only if all parties to the proceeding elect such a procedure. Such telephonic hearing shall be held in accordance with the procedures set forth in the order. Following the telephonic hearing, the Membership Committee or a designated Subcommittee shall issue a written decision in accordance with the standards set forth in paragraphs (a) and (b) of Rule 507.


                RULE 507. DECISION OF MEMBERSHIP COMMITTEE OR A DESIGNATED SUBCOMMITTEE.

                [Adopted effective December 10, 1993. Effective dates of amendments: August 1, 1994 and July 1, 2001.]

                (a) Standards of Proof. The written decision of the Membership Committee or its designated Subcommittee shall specifically consider whether NFA has shown by a preponderance of the evidence that the applicant or registrant is subject to the statutory disqualification from registration set forth in the Notice of Intent and, where appropriate:

                  (1) in actions involving statutory disqualifications set forth in Section 8a(2) of the Act, whether the applicant or registrant has made a clear and convincing showing that, notwithstanding the existence of the statutory disqualification, full or conditioned registration would not pose a substantial risk to the public; or

                  (2) in actions involving statutory disqualifications set forth in Sections 8a(3) or 8a(4) of the Act, whether the applicant or registrant has shown by a preponderance of the evidence that, notwithstanding the existence of the statutory disqualification, full or conditioned registration would not pose a substantial risk to the public.

                (b) Findings. In making its written decision, the Membership Committee or a designated Subcommittee shall set forth facts material to its finding that the applicant or registrant is, or is not, disqualified as alleged in the Notice of Intent and, where appropriate, its findings regarding:

                  (1) evidence mitigating the seriousness of the wrongdoing underlying the applicant's or registrant's statutory disqualification;

                  (2) evidence that the applicant or registrant has undergone rehabilitation since the time of the wrongful conduct underlying the statutory disqualification; and

                  (3) evidence that the applicant's or registrant's registration on a conditional basis would be subject to supervisory controls likely both to detect future wrongful conduct by the applicant or registrant and protect the public from any harm arising from such conduct. Such decision shall describe the specific conditions being imposed and provide that any sponsor or guarantor of applicant or registrant must be "eligible" as that term is defined in Rule 509(b)(5). It shall also fix a time period after which the applicant or registrant may petition to lift or modify the conditions in accordance with Rule 510.


                RULE 508. ORDERS.

                [Adopted effective April 4, 1988. Effective dates of amendments: October 29, 1991; December 10, 1993; August 1, 1994 and July 1, 2001.]

                (a) Final Orders and Withdrawals of Notice of Intent. All orders granting, denying, conditioning, suspending or revoking registration under this Part 500 (except an interim order suspending registration pursuant to Rule 504(b)) and all orders denying motions to vacate default orders under this Part 500 shall become a Final Order of NFA on the date of service upon the applicant or registrant. All Withdrawals of Notice of Intent shall become final on the date of service upon the applicant or registrant. A copy of each Final Order and Withdrawal of Notice of Intent issued by NFA shall be served upon the Commission at the same time it is served upon the applicant or registrant. All Final Orders shall inform the applicant or registrant of his right to petition the Commission for review under Section 17(o) of the Act and applicable Commission Regulations and of the right to petition the Commission for a stay of the effective date of the Final Order in accordance with Commission Regulation 171.22.

                (b) Effective Date. Any Final Order of NFA or Withdrawal of Notice of Intent issued under this Part 500 shall become effective 30 days after the date of service of the order on the applicant or registrant, except as otherwise directed by the Commission pursuant to CFTC Regulations, Part 171.


                RULE 509. SETTLEMENTS.

                [Adopted effective December 10, 1993. Effective dates of amendments: August 1, 1994; July 1, 2001; May 31, 2002 and April 2, 2004.]

                (a) When Offers May be Made. Parties may propose offers of settlement at any time during the course of the proceeding. All offers of settlement shall be in writing.

                (b) Content of Offer. Each offer of settlement made by a respondent shall:

                  (1) acknowledge service of the Notice of Intent;

                  (2) admit the jurisdiction of NFA with respect to the matters set forth in the Notice of Intent;

                  (3) include a waiver of:

                    (A) a hearing;

                    (B) all post-hearing procedures;

                    (C) Commission and judicial review;

                    (D) any objection to NFA staff's participation in the consideration of the offer by the Membership Committee or a designated Subcommittee;

                  (4) stipulate the basis in the record on which a Final Order may be entered, which basis may consist solely of the Notice of Intent and any findings contained in the order of settlement;

                  (5) in a case where a respondent is offering to be registered subject to conditions, contain representations by the firm or the individual, if the individual is sponsoring a FB or FT applicant or registrant, that will be sponsoring the respondent that the sponsor will abide by any conditions imposed on the applicant's or registrant's registration and that the sponsor is eligible to sponsor a registrant whose registration is subject to conditions. A firm or individual is eligible to sponsor a registrant whose registration is subject to conditions if the sponsor is not:

                    (A) subject to a pending adjudicatory proceeding brought by or before the Commission pursuant to the provisions of Sections 6(b), 6(c), 6c, 6d, 8a or 9 of the Act; or

                    (B) subject to a pending adjudicatory proceeding brought by or before NFA alleging fraud or failure to supervise; or

                    (C) subject to any special supervisory obligations imposed by the Commission or NFA or agreed to by such sponsor or guarantor; or

                    (D) subject to the reporting requirements of NFA Financial Requirements Section 6 or CFTC Regulation 31.7(b); or

                    (E) subject to a finding within the last five years, in an action by the Commission or NFA, that the firm or any of its current principals have engaged in fraud or have failed to supervise its APs;

                    (F) subject to a pending adjudicatory proceeding brought by or before NFA, against any of the firm's current principals, alleging fraud or failure to supervise; and

                  (6) consent to the entry of a Final Order reflecting the terms of settlement agreed upon, including where appropriate:

                    (A) findings that the respondent is disqualified from registration under Section 8a(2), 8a(3) or 8a(4) of the Act; and

                    (B) the revocation, suspension, denial or granting of full registration or imposition of conditioned registration.

                (c) Submission of Offer. Offers of settlement made by a respondent shall be submitted in writing to NFA staff, which shall present them to the Membership Committee or a designated Subcommittee with staff's recommendation. NFA staff shall inform the respondent if the recommendation will be unfavorable, in which case the offer will not be presented to the Membership Committee or a designated Subcommittee unless the respondent so requests. Any offer of settlement not presented to the Membership Committee or a designated Subcommittee shall be null and void with respect to any acknowledgment, admission, waiver, stipulation or consent contained therein and shall not be used in any manner in the proceeding by any party thereto.

                (d) Acceptance of Offer. The offer of settlement will only be deemed accepted upon issuance by the Membership Committee or a designated Subcommittee of a Final Order based on the offer. Upon issuance of the Final Order, the proceeding shall be terminated as to the respondent involved.

                (e) Rejection of Offer. When an offer of settlement is rejected by the Membership Committee or a designated Subcommittee, the party making the offer shall be notified by NFA staff and the offer of settlement shall be deemed withdrawn. A rejected offer of settlement and any documents relating thereto shall not constitute a part of the record in the proceeding. The offer will be null and void with respect to any acknowledgment, admission, waiver, stipulation or consent contained therein and shall not be used in any manner in the proceeding by any party thereto.


                RULE 510. PROCEDURES TO LIFT OR MODIFY CONDITIONS.

                [Adopted effective December 10, 1993. Effective dates of amendments: August 1, 1994 and July 1, 2001.]

                (a) Petition. The registrant and, when applicable, his sponsor or guarantor may file a petition to lift or modify the conditions on the registrant's registration.

                  (1) The petition may be filed after the period specified in the Final Order imposing the conditioned registration.

                  (2) In the petition, the registrant and, when applicable, his sponsor or guarantor shall be limited to a showing by affidavit that the applicant or registrant has not violated the Act or Regulations, or NFA Rules, since the time of his application and that the conditions set forth in the Final Order have been satisfied. The affidavit of a sponsor or guarantor must be sworn to on behalf of the sponsor or guarantor by a person with actual knowledge of the registrant's activities.

                (b) Response.

                  (1) Within 30 days of the date of receipt of the petition pursuant to paragraph (a) of this Rule, NFA staff shall file a response. The response shall include a recommendation by staff as to whether to continue the conditions, modify the conditions or allow for a full registration.

                  (2) If NFA staff agrees with the petitioner's request to lift or modify conditions on the petitioner's registration, it shall so recommend to the Membership Committee or a designated Subcommittee. Such recommendation will only be deemed accepted upon issuance by the Membership Committee or a designated Subcommittee of an order lifting or modifying the conditions on the petitioner's registration.

                (c) Oral Hearing. If NFA staff requests a continuation or a modification of the conditions on the registration other than in accordance with the terms of the petition, the Membership Committee or a designated Subcommittee shall, within 30 days of the date that the response is filed pursuant to paragraph (b) of this Rule, determine whether an oral hearing is appropriate to the resolution of the registrant's petition.

                  (1) If the Membership Committee or a designated Subcommittee determines that an oral hearing is appropriate, it shall notify the parties of its determination and shall schedule and conduct an oral hearing in accordance with Rule 506. Following the hearing, the Membership Committee or a designated Subcommittee shall issue a written decision or an order.

                  (2) If the Membership Committee or a designated Subcommittee concludes that an oral hearing is unnecessary, it shall notify the parties and issue a written decision or an order.


                Part 600. Withdrawal from Registration

                RULE 601. WITHDRAWAL FROM REGISTRATION.

                [Adopted effective April 4, 1988. Effective dates of amendments: June 8, 1988; September 29, 1989; September 21, 1993; May 31, 2002; September 30, 2010; and July 18, 2012.]

                (a) An FCM, RFED, SD, MSP, IB, CTA, CPO, LTM, FB or FT may request that its registration be withdrawn in accordance with the requirements of this Rule if:

                  (1) the registrant has ceased, or has not commenced, engaging in activities requiring registration in such capacity; or

                  (2) the registrant is exempt from registration in such capacity; or

                  (3) the registrant is excluded from the persons or any class of persons required to be registered in such capacity. Provided, that NFA may consider separately each capacity for which withdrawal is requested in acting upon such a request.

                (b) An FCM, RFED, SD, MSP, IB, CPO, CTA or LTM requesting withdrawal from registration under this Rule must file a Form 7-W completed and filed with NFA in accordance with all pertinent instructions. A FB or FT requesting withdrawal from registration under this Rule must file a Form 8-W completed and filed with NFA in accordance with all pertinent instructions. In addition, any FB or FT requesting withdrawal from registration must file a copy of his Form 8-W with each contract market or DTF that has granted him trading privileges.

                (c) A request for withdrawal from registration will become effective on the 30th day after receipt of such request by NFA, or earlier upon notice from NFA of the granting of such request, unless prior to the effective date:

                  (1) the Commission or NFA has instituted a proceeding to suspend or revoke such registration;

                  (2) the Commission or NFA imposes or gives notice that it intends to impose terms or conditions upon such withdrawal from registration;

                  (3) the registrant is given notice that it is currently the subject of an investigation to determine, among other things, whether such registrant has violated, is violating, or is about to violate the Act, rules, regulations, or orders adopted thereunder;

                  (4) NFA requests from the registrant further information pertaining to its request for withdrawal from registration; or

                  (5) NFA determines that it would be contrary to the requirements of the Act or of any rule, regulation or order thereunder, or to the public interest to permit such withdrawal from registration.

                (d) Withdrawal from registration in one capacity does not constitute withdrawal from registration in any other capacity.

                (e) Withdrawal from registration does not constitute a release from liability for any violation of the Act or of any rule, regulation or order thereunder, which occurred while a person was registered.


                Part 700. Procedures Governing Access to and Certification of Registration Records Maintained by NFA

                RULE 701. DISCLOSURE OF INFORMATION FROM REGISTRATION RECORDS MAINTAINED BY NFA.

                [Adopted effective April 4, 1988. Effective dates of amendments: June 8, 1988; July 29, 1988; September 21, 1993; May 31, 2002; September 9, 2002; September 30, 2010; and July 18, 2012.]

                (a) Definitions.

                  (1) Registration Records. For purposes of Rules 701 and 702, the term registration records shall be defined to include only the following types of records which are in the custody of or maintained by NFA because such records were transferred from the Commission to NFA or because such records have been received, generated, or compiled by NFA in performance of registration functions which NFA is authorized or required by the Commission to perform pursuant to Sections 8a(10) or 17(o) of the Act:

                    (A) any application forms required to be filed to obtain registration, including any Form 8-R with respect to principals of an applicant or registrant, any schedules or supplements related to such forms, any fingerprint cards, any financial reports, statements and agreements required to be filed in connection with initial applications for registration;

                    (B) any supplemental statement or filings to correct or update any registration information submitted in a previous filing or to give notice of termination of association of an AP or affiliation of a principal;

                    (C) any written or electronic correspondence relating to registration between the Commission or NFA and an applicant or registrant;

                    (D) reports reflecting information developed from sources outside the Commission or NFA compiled or generated in connection with determining fitness for registration or affiliation as a principal; and

                    (E) reports from foreign governments and self-regulatory organizations and agreements appointing an agent for service of process if such reports and agreements are filed with NFA for the purpose of obtaining an exemption from registration, and any transmittal forms, cover letters or supplemental materials relating to such filings.

                  (2) Registration Information. For purposes of Rules 701 and 702, the term registration information shall be defined as any information contained in, compiled from or related to registration records.

                (b) Disclosure of Public Information.

                  (1) If any member of the public requests access to registration records, or portions thereof, and the requested record, or portion, is "public" or "publicly available" under CFTC Regulations 1.10(g), 145.0(c) or 145.6(b), then NFA will release that record or portion to the requester.

                  (2) NFA may charge any member of the public a copying fee, not to exceed the fee charged by the Commission, for any copies of registration records provided by NFA directly to the requester.

                (c) Disclosure of Non-Public Information. Requests for access to registration records, or portions thereof, not subject to disclosure as public or publicly available under paragraph (b)(1) of this Rule shall be referred or transmitted to the Commission for response; except that, NFA will disclose such records or portion thereof:

                  (1) to any person with whom an applicant or registrant is or plans to be associated as an AP or affiliated as a principal or with whom an individual is or plans on being associated as a Swap AP: Provided, however, that the person requesting the information makes an appropriate showing to NFA that the requester is the employer or prospective employer of the particular applicant, registrant, or principal;

                  (2) to any FCM or RFED with whom an IB, whether an applicant or registrant, has or plans to enter into a guarantee agreement under CFTC Regulation 1.10: Provided, however, that the FCM or RFED makes an appropriate showing as to its status as the IB's guarantor or proposed guarantor;

                  (3) to boards of trade designated as contract markets or to any other futures associations registered with the Commission to assist those organizations in carrying out their responsibilities under the Act, or to national securities exchanges or national securities associations registered with the SEC to assist those organizations in carrying out their responsibilities under the Securities Exchange Act of 1934: Provided, however, that if a request is made in connection with a formal or apparent investigation or proceeding, NFA will notify the Commission of the request;

                  (4) to federal, state or local law enforcement or regulatory agencies acting within the scope of their jurisdiction or for their use in meeting responsibilities assigned to them under law (to the same extent that the Commission may disclose such registration information under Sections 8(e) and 8(g) of the Act): Provided, however, that if a request is made in connection with a formal or apparent investigation or proceeding, NFA will notify the Commission of the request;

                  (5) pursuant to an order of a court of competent jurisdiction; except that, subpoenas and summonses covering non-public portions of registration records and copies of the non-public records shall be promptly forwarded to the Commission to enable the Commission to consult with NFA on how to proceed;

                  (6) otherwise with the authorization of the Assistant Secretary of the Commission for FOI, Privacy and Sunshine Act Compliance or his or her designee, or the General Counsel of the Commission or his or her designee, in accordance with CFTC Regulations 145.7(b), (h) and (i); the Freedom of Information Act, 5 U.S.C. § 552; and the Privacy Act, 5 U.S.C. § 552a; and

                  (7) to any individual or firm, or person acting on behalf of the individual or firm, who seeks access to registration records, excluding any records defined under Section (a)(1)(D) above, in connection with that individual's or firm's application for registration: Provided, however, that NFA receives proper verification of the identity and authority of the party requesting the records.


                RULE 702. CERTIFICATION OF THE AUTHENTICITY OF REGISTRATION RECORDS MAINTAINED BY NFA.

                [Adopted effective April 4, 1988. Effective dates of amendments: September 21, 1993 and May 31, 2002.]

                (a) Designation of Custodian and Deputies. The President shall designate an NFA employee to serve as the NFA Record Custodian ("Custodian"). The President also may designate one or more NFA employees to serve as Deputy NFA Record Custodians ("Deputies"). The Custodian and the Deputies shall be responsible for maintaining all registration records in NFA's possession and shall be the legal custodians of these registration records.

                (b) Authority of Custodian and Deputies. The Custodian, each of the Deputies, or in their absence, any NFA employee designated by the President, the Custodian or one of the Deputies, is authorized to certify in writing the authenticity of registration records in NFA's possession for purposes of any judicial or administrative proceeding. The Custodian, each of the Deputies or any designated employee also is authorized to certify in writing as to the maintenance and completeness of the registration records in NFA's possession, as well as the thoroughness of NFA's search for requested documents, for purposes of any judicial or administrative proceeding.

                (c) Effectiveness of Certification. This written certification shall be effective when executed by the Custodian, one of the Deputies or any designated employee.

                (d) Content of Certification. The written certification shall include that, pursuant to Commission authorization, the Custodian has and maintains legal custody of the official registration records that are the subject of the certification.


                Part 800. Electronic Filing of Registration Forms

                RULE 801. ELECTRONIC FILING OF FORMS 7-R, 8-R, 3-R, 7-W AND 8-T.

                [Adopted effective December 16, 1992. Effective dates of amendments: May 31, 2002; July 21, 2003; September 30, 2010; and July 18, 2012.]

                (a) Unless otherwise provided by these Rules, registrants which are FCMs, RFEDs, SDs, MSPs, IBs, CPOs, CTAs, FBs and FTs and IBs, CPOs and CTAs which are confirmed as exempt from registration pursuant to CFTC Regulation 30.5 and applicants for registration in such categories or for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5 must file their Form 7-Rs and Form 8-Rs; Form 8-Rs for their principals and for registration of their APs; Form 3-Rs for themselves, their APs and principals; Form 7-Ws; and Form 8-Ts electronically by accessing NFA's registration and membership database in the manner provided by NFA. FCM, RFED, SD, MSP, IB, CPO and CTA registrants or applicants, IBs and CPOs and CTAs that are confirmed as exempt from registration pursuant to CFTC Regulation 30.5 or applicants for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5 may authorize any person to make electronic registration filings on their behalf. FB and FT registrants and applicants may authorize any other person to electronically file Form 3-R's on their behalf but may not authorize any other person to file Form 8-Rs on their behalf. Any electronic registration filing that such an authorized person makes on behalf of the FCM, RFED, SD, MSP, IB, CPO, CTA, FB or FT registrant or applicant or IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 or applicant for exemption from registration pursuant to CFTC Regulation 30.5 shall be deemed to have been made by the FCM, RFED, SD, MSP, IB, CPO, CTA, FB or FT registrant or applicant or IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 or applicant for exemption from registration pursuant to CFTC Regulation 30.5 granting the authorization to such person.

                (b) Individuals for whom a sponsor has filed a Form 8-R must, if required by these Rules to do so, verify the information electronically by accessing NFA's registration and membership database in the manner provided by NFA. Individuals may not authorize any other person to make such verification on their behalf.

                (c) No applicant, applicant for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5, registrant, IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 or principal may access NFA's electronic registration and membership database until NFA has assigned it a unique identifying code and password.

                (d) Each applicant, applicant for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5, registrant, IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 and principal is responsible for maintaining the security and confidentiality of its identifying code and password and those of the persons whom it authorizes to make electronic registration filings on its behalf. NFA's electronic registration and membership database shall record and store the identifying code of each person accessing the database and shall logically associate in the database such identifying code with any electronic filing made by the person using such identifying code. The person whose identifying code is used to make an electronic filing will be deemed to have made such filing.

                (e) Each registrant or applicant FCM, RFED, SD, MSP, IB, CPO, CTA, FB or FT or IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5 or applicant for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5 shall make available any person it has authorized to make or actually performing duties related to electronic filings, for testimony in court or before the Commission, NFA, any contract market regarding the authentication, integrity or accuracy of any electronic filing.

                (f) The ability to electronically access NFA's registration and membership database is a privilege and not a right. NFA may disable any person's identifying code and password and terminate the person's ability to electronically file forms at any time, without notice or a hearing, in NFA's sole discretion, if NFA believes that the person has not complied with this Rule or any procedures that NFA establishes to implement this Rule.


                RULE 802. CERTIFICATIONS, ACKNOWLEDGEMENTS, AGREEMENTS AND REPRESENTATIONS.

                [Adopted effective May 31, 2002. Effective dates of amendments: September 9, 2002; July 21, 2003; December 15, 2003; September 30, 2010; and July 18, 2012.]

                (a) The electronic filing of a Form 7-R for registration as an FCM, RFED, SD, MSP, IB, CPO and CTA or for exemption from registration as an IB, CPO and CTA pursuant to CFTC Regulation 30.5 is deemed to constitute the applicant's:

                  (1) certification that the answers and the information provided in the Form 7-R are true, complete and accurate and that in light of the circumstances under which the applicant has given them, the answers and statements in the Form 7-R are not misleading in any material respect;

                  (2) certification that the person who electronically files the Form 7-R on behalf of the applicant is authorized by the applicant to file the Form 7-R and to make the certifications, representations, requests, acknowledgements, authorizations and agreements contained in this Rule;

                  (3) acknowledgement that the applicant is subject to the imposition of criminal penalties under Section 9(a) of the Act and 18 U.S.C. §1001 for any false statements or omissions made in the Form 7-R;

                  (4) acknowledgement that the applicant is responsible at all times for maintaining the information in the Form 7-R in a complete, accurate and current manner by electronically filing updates to the information contained therein;

                  (5) acknowledgement that the applicant may not act as an FCM, RFED, SD, MSP, IB, CPO or CTA until registration has been granted; in the case of an IB, until registration or a temporary license has been granted; in the case of an SD or MSP, until registration or provisional registration has been granted; or until confirmation of exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5 is granted;

                  (6) authorization that NFA may conduct an investigation to determine the applicant’s fitness for registration or for confirmation of exemption from registration as an IB, CPO and CTA pursuant to CFTC Regulation 30.5 and, if applicable, NFA membership and agreement to cooperate promptly and fully, consistent with applicable Federal law, in such investigation, which investigation may include contacting foreign regulatory and law enforcement authorities, including the submission of documents and information to NFA that NFA, in its discretion, may require in connection with the applicant’s application for registration, confirmation of exemption from registration as an IB, CPO and CTA pursuant to CFTC Regulation 30.5 or NFA membership;

                  (7) authorization and request that any person, including but not limited to contract markets, furnish upon request to NFA or any agent acting on behalf of NFA any information requested by NFA in connection with any investigation conducted by NFA to determine the applicant’s fitness for registration or for confirmation of exemption from registration as an IB, CPO and CTA pursuant to CFTC Regulation 30.5;

                  (8) agreement that any person furnishing information to NFA or any agent acting on behalf of NFA in connection with the investigation so authorized is released from any and all liability of whatever nature by reason of furnishing such information to NFA or any agent acting on behalf of NFA;

                  (9) agreement that, if the applicant is a foreign applicant:

                    (i) the applicant's books and records will be available for inspection by the CFTC, the U.S. Department of Justice ("DOJ") and NFA for purposes of determining compliance with the Act, CFTC Regulations and NFA Requirements;

                    (ii) such books and records will be produced on 72 hours notice at the location in the United States stated in the Form 7-R or, in the case of an IB, CPO or CTA confirmed as exempt from registration pursuant to CFTC Regulation 30.5, at the location specified by the CFTC or DOJ; provided, however, if the applicant is applying for registration as an FCM, SD, MSP or RFED, upon specific request, such books and records will be produced on 24 hours notice except for good cause shown;

                    (iii) the applicant will immediately notify NFA of any changes to the location in the United States where such books and records will be produced;

                    (iv) the applicant is not subject to any blocking, privacy or secrecy laws which would interfere with or create an obstacle to full inspection of the applicant's books and records by the CFTC, DOJ and NFA; and

                    (v) the failure to provide the CFTC, DOJ or NFA with access to its books and records in accordance with this agreement may be grounds for enforcement and disciplinary sanctions; denial, suspension or revocation of registration; withdrawal of confirmation of exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5; and denial, suspension or termination of NFA membership;

                    (vi) the applicant for registration shall provide to NFA copies of any audit or disciplinary report related to the applicant for registration issued by any non-U.S. regulatory authority or non-U.S. self-regulatory organization and any required notice that the applicant for registration provides to any non-U.S. regulatory authority or non-U.S. self-regulatory organization. The applicant for registration shall provide these copies both as part of this application and thereafter immediately upon the applicant for registration's receipt of any such report or provision of any such notice; and

                  (10) representation that if the applicant is an applicant for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5:

                    (i) the applicant does not act as an IB, CPO or CTA, respectively, in connection with trading on or subject to the rules of a designated contract market in the United States by, for or on behalf of any U.S. customer, client or pool;

                    (ii) the applicant irrevocably agrees to the jurisdiction of the Commission and state and federal courts located in the U.S. with respect to activities and transactions subject to Part 30 of the CFTC's regulations; and

                    (iii) the applicant would not be statutorily disqualified from registration under §8a(2) or §8a(3) of the Act and is not disqualified from registration pursuant to the laws or regulations of its home country; and

                  (11) certification that, if the applicant is an applicant for registration as an SD or MSP, the applicant undertakes that, no later than ninety (90) days following the date this Form 7-R is filed, it will be and shall remain in compliance with the requirement of Section 4s(b)(6) of the Act that, except to the extent otherwise specifically provided by the rule, regulation or order, the applicant will not permit any person associated with it who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of the applicant, if the applicant knows, or in the exercise of reasonable care should know, of the statutory disqualification. For the purpose of this certification, "statutory disqualification" refers to the matters addressed in Section 8a(2) and 8a(3) of the Act and "person" means an "associated person of a swap dealer or major swap participant" as defined in Section 1a(4) of the Act and CFTC regulations thereunder.

                (b) The electronic filing of a Form 8-R for registration as an FB or FT is deemed to constitute the applicant's:

                  (1) certification that the answers and statements in the Form 8-R are true and that in light of the circumstances under which the applicant has given them, the answers and statements in the Form 8-R are not misleading in any material respect;

                  (2) acknowledgement that the applicant is subject to the imposition of criminal penalties under Section 9(a) of the Act and 18 U.S.C. §1001 for any false statements or omissions made in the Form 8-R;

                  (3) acknowledgement that the applicant is responsible at all times for maintaining the information in the Form 8-R in a complete, accurate and current manner by electronically filing updates to the information contained therein;

                  (4) acknowledgement that the business address provided on the Form 8-R may be deemed to be the address for delivery to the applicant of any written communications from the Commission and NFA, including any notice of intent to deny, revoke or otherwise affect the applicant's registration, any summons, complaint, reparations claim, arbitration claim, order, subpoena, request for information, or any other written communication unless the applicant specifies another address for this purpose;

                  (5) acknowledgement that the applicant must keep current the business address provided on the Form 8-R while registered and for two years after termination of registration;

                  (6) authorization that NFA may conduct an investigation to determine the applicant’s fitness for registration and agreement to cooperate promptly and fully, consistent with applicable Federal law, in such investigation, which investigation may include contacting foreign regulatory and law enforcement authorities, including the submission of documents and information to NFA that NFA, in its discretion, may require in connection with the applicant’s application for registration;

                  (7) authorization and request that any person, including but not limited to contract markets, furnish upon request to NFA or any agent acting on behalf of NFA any information requested by NFA in connection with any investigation conducted by NFA to determine the applicant's fitness for registration;

                  (8) agreement that any person furnishing information to NFA or any agent acting on behalf of NFA in connection with the investigation so authorized is released from any and all liability of whatever nature by reason of furnishing such information to NFA or any agent acting on behalf of NFA; and

                  (9) acknowledgement that the applicant is not registered and may not act as an FB or FT until a notice has been issued that registration or a temporary license has been granted.

                (c) The electronic filing of a Form 8-R for an AP or for an individual principal is deemed to constitute the sponsor's:

                  (1) verification that the answers and statements in the application or Form 8-R are true, complete and accurate and that in light of the circumstances under which the applicant or principal has given them, the answers and statements in the Form 8-R are not misleading in any material respect;

                  (2) certification that the AP applicant or principal has authorized the sponsor to electronically file the Form 8-R on the AP applicant's behalf or the principal's behalf and that the sponsor has authorized the person who files the application to file the Form 8-R and to make the certifications, acknowledgements, authorizations, representations, requests and agreements contained in this Rule;

                  (3) acknowledgement that the sponsor is subject to the imposition of criminal penalties under Section 9(a) of the Act and 18 U.S.C. §1001 for any false statements or omissions it made in the Form 8-R;

                  (4) acknowledgement that while the individual is an AP sponsored by or a principal of the sponsor, the sponsor is responsible for maintaining the information in the Form 8-R in a complete, accurate and current manner by electronically filing updates to the information contained therein;

                  (5) certification that the sponsor has communicated or has attempted to communicate with all of the applicant's previous employers and educational institutions for the past three years and has documentation on file with the names of the persons contacted and the dates of contact or, if no contact was made, the reason therefor;

                  (6) certification that the applicant has been hired or is employed by the sponsor or that it is the intention of the sponsor to hire or otherwise employ the applicant as an AP within 30 days after receipt of notification that the applicant has received a TL or has been registered;

                  (7) certification that the applicant will not be permitted to act as an AP until the applicant has received a TL or has been registered as an AP;

                  (8) acknowledgement that it is the duty and obligation of the sponsor not to employ an individual with a statutory disqualification under Section 8a(2) of the Act; to notify the Commission when any individual associated with the sponsor is subject to a statutory disqualification under Section 8a(2) of the Act; and to supervise any individual for whom the sponsor files a Form 8-R, once the sponsor employs him, with a view toward preventing him or her from committing violations of the Act and the rules, regulations and orders thereunder;

                  (9) certification, if the sponsor is a new sponsor filing an application for registration of the applicant as an AP pursuant to the provisions of Rule 207(a), that the sponsor has verified that the applicant is not subject to a disqualification from registration under Section 8a(2) of the Act and that the sponsor meets the requirements set forth in Rule 509(b)(5);

                  (10) acknowledgement that information contained in the Form 8-R has been supplied to the sponsor for the sole purpose of allowing it to verify the information contained in the Form 8-R;

                  (11) representation that the sponsor has taken, and will take, such measures as are necessary to prevent the unwarranted dissemination of any of the information contained in the Form 8-R and the records and documents retained in support of the Form 8-R;

                  (12) certification, if the applicant is applying for a TL pursuant to Rule 301(a)(2), that the sponsor has reviewed the information concerning the applicant in NFA's BASIC system and has received a copy of the notice of the institution of any proceeding in the BASIC system:

                    (A) that is pending and was brought against the applicant under:

                      (i) Sections 6(c), 6(d), 6c, 6d, 8a or 9 of the Act;
                      (ii) Commission Regulations 3.55 or 3.60; or
                      (iii) NFA or exchange rules and; or

                    (B) that was instituted in accordance with the procedures provided in CFTC Regulation 3.51 or Part 500 of these Rules and, within the prior 12 months, resulted in the Commission or NFA permitting the withdrawal of such person's application for registration in any capacity; and

                  (13) representation, if the applicant is subject to any current NFA or Commission order imposing conditions on the registration of the applicant, that it meets the requirements set forth in Rule 509(b)(5) to sponsor a conditioned registrant; that it has reviewed the conditions contained in any current NFA or Commission order imposing conditions on the registration of the applicant; and that it will supervise the applicant in accordance with the conditions contained in the order.

                (d) The electronic verification by an individual of the information contained in the Form 8-R constitutes the applicant's or principal's:

                  (1) verification that the answers and statements in the application or Form 8-R are true and that in light of the circumstances under which the applicant or principal has given them, the answers and statements in the Form 8-R are not misleading in any material respect;

                  (2) acknowledgement that the applicant or principal is subject to the imposition of criminal penalties under Section 9(b) of the Act and 18 U.S.C. §1001 for any false statements or omissions made in the Form 8-R;

                  (3) acknowledgement that the applicant or principal is responsible at all times for maintaining the information in the Form 8-R in a complete, accurate and current manner by promptly notifying the sponsor whenever any of the information on the Form 8-R is no longer complete, accurate or current and authorizing the sponsor to electronically file updates to correct the information;

                  (4) certification, if applying for a TL pursuant to the provisions of Rule 301(a)(2), that the applicant has advised the sponsor of and has provided the sponsor with a copy of the notice of the institution of:

                    (A) any pending adjudicatory proceeding that was brought against the applicant under:

                      (i) Sections 6(c), 6(d), 6c, 6d, 8a or 9 of the Act;
                      (ii) Commission Regulations 3.55 or 3.60; or
                      (iii) NFA or exchange rules; or

                    (B) any proceeding that was brought against the applicant under Regulation 3.51 or Part 500 of these Rules and, within the prior 12 months, resulted in the Commission or NFA permitting the withdrawal of such person's application for registration in any capacity;

                  (5) acknowledgement that the residential address provided on the Form 8-R may be deemed to be the address for delivery to the applicant or principal of any written communications from the Commission and NFA, including any notice of intent to deny, revoke or otherwise affect the applicant's registration or individual's status as principal, any summons, complaint, reparations claim, arbitration claim, order, subpoena, request for information, or any other written communication unless the applicant or principal specifies another address for this purpose;

                  (6) acknowledgement that the applicant or principal must keep current the residential address provided on the Form 8-R while registered as an AP or affiliated as a principal and for two years after termination of registration or affiliation;

                  (7) agreement that the applicant submits to the jurisdiction of any contract market, of which the applicant's sponsor or any current or future guarantor (under CFTC Rule 1.10(j)) of the applicant's sponsor is or may become a member, which has or may adopt rules which apply to the applicant as an associated person, and that the applicant shall abide by all such rules and to comply with, be subject to, and abide by all requirements, rulings, orders, directives and decisions of and any penalties, prohibitions and limitations imposed by any such contract market;

                  (8) authorization that NFA, and any contract market of which the applicant’s or principal’s sponsor or any current or future guarantor (under CFTC Rule 1.10(j)) of the applicant’s or principal’s sponsor is or may become a member, may conduct an investigation to determine the applicant’s or principal’s fitness for registration, and if applicable, for Associate status, and agreement to cooperate promptly and fully, consistent with applicable Federal law, in such investigation, which may include contacting foreign regulatory and law enforcement authorities, including the submission of documents and information to NFA that NFA, in its discretion, may require in connection with the applicant’s or principal’s fitness for registration or Associate status;

                  (9) authorization and request that any person, including but not limited to contract markets, furnish upon request to NFA or any agent acting on behalf of NFA any information requested by NFA in connection with any investigation conducted by NFA to determine the applicant's fitness for registration or fitness of the principal;

                  (10) agreement that any person furnishing information to NFA or any agent acting on behalf of NFA in connection with the investigation so authorized is released from any and all liability of whatever nature by reason of furnishing such information to NFA or any agent acting on behalf of NFA; and

                  (11) acknowledgement that the applicant is not registered and may not act as an AP until a notice has been issued that registration or a TL has been granted.

                (e) The electronic filing of a Form 3-R, 8-T or 7-W is deemed to constitute the sponsor's, applicant's or registrant's:

                  (1) certification that the answers and the information provided in the Form 3-R, 8-T or 7-W are true, complete and accurate and that in light of the circumstances under which the sponsor, applicant or registrant has given them, the answers and statements in the Form 3-R, 8-T or 7-W are not misleading in any material respect;

                  (2) certification that the person who electronically files the Form 3-R, 8-T or 7-W on behalf of the sponsor, applicant or registrant is authorized by the sponsor, applicant or registrant to file the Form 3-R, 8-T or 7-W and to make the certifications and acknowledgements contained in this Rule; and

                  (3) acknowledgement that the sponsor, applicant or registrant is subject to the imposition of criminal penalties under Section 9(a) of the Act and 18 U.S.C. §1001 for any false statements or omissions made in the Form 3-R, 8-T or 7-W.

                (f) Retention of Records. In accordance with Commission Regulation 1.31, FCM, RFED, SD, MSP, IB, CTA, CPO, LTM, FB and FT applicants and registrants and their sponsors, if applicable, applicants for exemption from registration as an IB, CPO or CTA pursuant to CFTC Regulation 30.5 and IBs, CPOs and CTAs confirmed as exempt from registration pursuant to CFTC Regulation 30.5 must retain such records as are necessary to support the certifications required by this Rule.


                Interpretive Notices


                9001 - RESERVED


                9002 - REGISTRATION REQUIREMENTS; BRANCH OFFICES

                (Staff, September 6, 1985; revised July 1, 2000; December 9, 2005; and September 30, 2010)

                INTERPRETIVE NOTICE

                Form 7-R, Branch Offices

                Any location, other than the main business address at which an FCM, RFED, IB, CPO or CTA employs persons engaged in activities requiring registration as an AP, is a branch office. This is true even if there is only one person at the location. If the firm has one or more branch offices, NFA's registration records on the firm must include the names of all persons who are branch office managers. Each location must have a branch office manager, and that person's status as a branch office manager should be listed in the Registration Categories section of the person's Form 8-R even if previously listed as a principal in the Registration Categories section of the person's Form 8-R. Each branch office must have a different manager.

                The address must also be given for each branch office. A P.O. Box is not sufficient. Anyone with a status as branch office manager must also be currently registered as an AP or have applied for such registration. Whenever a new branch office is established it must be reported, with all the required information, to NFA by filing an update electronically to the firm's Form 7-R. The closing of an existing branch office should also be reported by filing an update electronically to the firm's Form 7-R.

                IF YOUR FIRM CURRENTLY HAS PERSONS OPERATING OUT OF LOCATIONS OTHER THAN ITS MAIN BUSINESS ADDRESS, THOSE LOCATIONS MUST IMMEDIATELY BE REPORTED TO NFA BY FILING AN UPDATE ELECTRONICALLY TO THE FIRM'S FORM 7-R AND BY ADDING BRANCH OFFICE MANAGER STATUS ON EACH BRANCH OFFICE MANAGER'S FORM 8-R.

                NFA may take disciplinary action against any Member which fails to properly list all of its offices.

                An important point to recognize is that a branch office may not itself be a separate corporation or partnership. CFTC Regulation 166.4 requires each branch office to use the name of the firm of which it is a branch for all purposes and to hold itself out to the public under such name. Also, in CFTC Interpretive Letter No. 84-10 (May 29, 1984) it was concluded that a branch office could not maintain a separate identity from the Member. One obvious conclusion to be drawn from this information is that each AP in a branch office must be paid directly by the Member. Payment through any intermediary would lead to the assumption that the intermediary would be required to register as an IB.

                The requirement that a branch office hold itself out to the public under the name of the Member is intended to ensure that customers are always aware of the Member with which they are doing business. It is necessary that any branch office AP, even one operating out of a residence or an unrelated place of business, make sure that customers understand who they are doing business with.


                9003 - NFA COMPLIANCE RULE 2-29: COMMUNICATIONS WITH THE PUBLIC AND PROMOTIONAL MATERIAL

                (Board of Directors, effective November 19, 1985; revised July 24, 2000)

                INTERPRETIVE NOTICE

                I. Introduction

                Section 17(p)(3) of the Commodity Exchange Act (7 U.S.C. §21(p)(3)) requires that the rules of a registered futures association such as NFA "establish minimum standards governing the sales practices of its members and persons associated therewith. . . ." NFA has established such minimum standards in the form of its Compliance Rules which, among other things, generally prohibit fraud and deceit and require Members and Associates to "observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business." Although these rules supply the required minimum standard, they are general in nature and may not always provide specific guidance as to what particular conduct may be prohibited. It is expected that more detailed content will be given to those general rules through the work of NFA's Business Conduct Committees, which will issue decisions in disciplinary cases applying the rules to specific conduct. It is also expected that NFA's Advisory Committees, through study and recommendation of rule changes, will further the development of uniform industrywide sales practice standards.

                NFA's Board of Directors has adopted and the CFTC has approved a new Compliance Rule, 2-29, which was proposed to the Board by the FCM Advisory Committee ("The Committee"). The Committee published a notice for public comment on its proposed rule on February 21, 1985, and considered the comments received in drafting the final rule.

                II. The Contemplated Relationship of Rule 2-29 With Other NFA Rules

                Rule 2-29 deals specifically with communication with the public and promotional material prepared and used in the conduct of a Member's or Associate's futures business. However, Member and Associate conduct in that area, as in all others related to futures, is, and under the new rule continues to be, subject to all other NFA requirements. For example, certain other NFA Rules deal specifically with communications with the public and promotional materials in a narrower context. Compliance Rule 2-13, which incorporates CFTC Rule 4.41, regulates the advertising of Commodity Pool Operators ("CPOs") and Commodity Trading Advisors ("CTAs"). In addition, all Member and Associate conduct, including communications with the public, is subject to the requirements of Compliance Rule 2-2 (Fraud and Related Matters) and Compliance Rule 2-4 (Just and Equitable Principles of Trade).

                The new Rule is not intended to supplant those or any other NFA Requirements but rather to augment them. Hence, literal compliance with Rule 2-29 will not be a "safe harbor" from NFA disciplinary action if the Member or Associate violates any other NFA Requirement.

                III. The Scope of Rule 2-29

                Rule 2-29 is intended to apply to all forms of communication with the public by a Member or Associate without exception if the communication relates in any way to solicitation of an account, agreement or transaction in the conduct of the Member's or Associate's business in futures as the term "futures" is now or may be defined.1

                However, in drafting the Rule the Committee recognized that some specific standards which would be appropriate for communications prepared in advance of delivery to the public might be unenforceable and even inappropriate in the context of routine day-to-day contact with customers. The Committee was concerned that the free flow of information and advice to customers might be impeded to their detriment if spontaneous communication were subjected to rigorous and detailed content standards.

                To address this problem, the final Rule distinguishes routine day-to-day communications with customers and applies a different regulatory standard to such communications. This is accomplished by providing a definition of "promotional material" to identify the kinds of communications with the public which will be subject to specific content standards and other requirements beyond those provided in Section (a) General Prohibition. Therefore, the definition of promotional material (which is a broadened version of the definition of that term in the CFTC's option pilot program rules) is intended to include all kinds of promotional communications with the public, other than routine day-to-day contact with customers. It includes, for example, any kind of written, electronic or mechanically reproduced message or presentation which is directed to any member of the public, whether broadcast over the media, delivered through the mail or presented personally. It also includes any oral presentations or statements to customers or prospective customers, whether delivered over the telephone or in person, the substance of which is outlined or scripted in advance for delivery to such persons.

                IV. Section-by-Section Analysis

                Section (a) General Prohibition

                This Section provides the general rule governing all communications with the public and is the only portion of the Rule applicable to routine day-to-day communication with customers. That means that routine customer contact would not run afoul of Rule 2-29 as long as it is not fraudulent or deceitful, is not high-pressure in nature and does not contain any statement that futures trading is appropriate for all persons. NFA believes that the general prohibition should not hamper free and open communication with individual customers on a day-to-day basis. In that regard, it is expected that Business Conduct Committees would not find such communications to operate as a fraud or deceit in the absence of evidence of such intent or recklessness on the part of the Member or Associate.2

                Section (b) Content of Promotional Material

                This Section sets out the specific prohibitions and requirements applicable to promotional material, as defined. Subsection (1) bans material likely to deceive the public. Proof of violation of this provision does not require proof of a specific intent to deceive. This Subsection instead places the burden on the Member to determine whether the material is likely to be deceptive in effect. Of course, to find a violation of this Subsection a Business Conduct Committee would have to find that the Member or Associate reasonably should have been able to determine that the material was likely to deceive. The fact that someone was actually deceived would not by itself be enough.

                Subsection (2) deals with facts only. It requires that the facts which a Member or Associate chooses to include must be true and that no facts knowingly be left out which are necessary to make the facts stated not misleading. With that exception, this Subsection does not require the disclosure of facts. As with Subsection (1), a negligence standard would be applied in finding violations of Subsection (2) for making material misstatements of fact in promotional material. However, because evaluating omissions is a much more difficult task, this Subsection applies only to knowing omissions (i.e., instances where the person preparing or reviewing the promotional material knew the omitted fact and failed to include it). This knowledge requirement may complicate the proof necessary to establish a violation of this Subsection. However, knowledge can be inferred from a pattern of failures to include a material fact, the omission of which makes the promotional material misleading. Once knowledge is established, the decision whether the failure to include a fact makes the promotional material misleading in violation of Rule 2-29 will be made by a Business Conduct Committee under a standard of reasonableness.

                Subsection (3) requires a statement of risk to "balance" any discussion of the possibility of profit. The requirement that the statement of risk have equal prominence is not intended to mean that the reference to risk must be as long as the discussion of the possibility of profit or indeed to impose any unbending measure of prominence. It is intended to mean only that in the context of the particular promotional material the reference to risk of loss must not be downplayed or hidden.

                Subsection (4) requires the Member or Associate to make a statement in the promotional material concerning the predictive value of past results if reference is made in the material to past trading results.

                Subsection (5) does not require disclosure of past performance of managed accounts.3 It does require that if performance information is given, it must be representative of the actual performance for the same time period of all reasonably comparable accounts. Hence, under Subsection (5) a Member could not advertise the performance of a "model" account unless that performance is representative of all reasonably comparable accounts.4 Subsection (5) also makes explicit in this context the Members' existing responsibility to be able to demonstrate that performance information is accurate and representative.

                The use of performance information in promotional material is, of course, subject to all of the content standards of Rule 2-29, and compliance with Subsection (b)(5) will not excuse violations of other Subsections. If in presenting performance information for an account or group of accounts, a Member omits facts about those accounts or the differences between those accounts and the account being promoted, and the omission makes the material misleading, the use of the material violates Subsection (b)(2) even though the performance information given is accurate and is representative of all reasonably comparable accounts in compliance with (b)(5). This interaction of the requirements of Subsections (b)(2) and (b)(5) will come into play whenever a Member chooses to present performance information about an account or program which differs materially from the account or program being promoted; for example, where performance information about a house account is used, or where trading control or strategies, commission rates or account sizes which applied in the account or program for which performance is being shown differ from those which will apply in the account or program for which the customer is being solicited. Under the Rule, a Member is free to use a sales tool performance information about accounts which differ from the accounts being promoted, but must take care to ensure first, that the performance information complies with Subsection (b)(5), and second, that the differences are explained to the extent necessary to make the promotional material not misleading.

                Finally, Subsection (5) requires that the rate of return must not be calculated in a manner inconsistent with that required under the CFTC's Part 4 Rules, which define rate of return as the ratio between net performance and beginning net asset value for the period. This is not intended to require that the precise Part 4 formula be used in all cases but rather to prohibit the use of methods which lead to rates of return which are materially higher than those produced by the Part 4 method.

                Section (e) Written Supervisory Procedures

                In recognition of the fact that promotional material may be prepared by many individuals within a Member's organization, this Section requires that promotional material be reviewed and approved by someone in a supervisory position before it is used. It should be emphasized, however, that even communications with the public which do not fall within the definition of promotional material must be diligently supervised under other existing NFA and CFTC rules.

                Section (f) Recordkeeping

                This Section is intended to provide a way in which NFA can conduct meaningful sales practice audits which will reveal both the content of promotional material and whether the supervisory procedures required under Section (e) are being carried out. In addition, this Section contains a requirement that Members who use hypothetical performance results be prepared to demonstrate to NFA's satisfaction the basis for such results. This means that Members must maintain the records necessary to document how the hypothetical results were calculated.

                [NOTE: This requirement was extended to all performance results effective July 24, 2000.]

                Section (g) Filing with NFA

                This Section is intended to allow NFA to maintain close review of promotional material in circumstances where special scrutiny is warranted.

                [NOTE: This interpretive notice was amended effective July 24, 2000 to conform it to subsequent changes in NFA rules. In particular, the amendments eliminate the discussion of hypothetical results and update section references within Compliance Rule 2-29 based on changes to Compliance Rule 2-29's treatment of hypothetical results; eliminate references to options rules that are no longer in effect; and make other technical amendments to correspond to subsequent changes to other NFA rules. Furthermore, adjudicated disciplinary decisions are now issued by NFA Hearing Panels rather than Business Conduct Committees. Therefore, all references to Business Conduct Committees, while not changed in the notice, now refer to Hearing Panels. In all other respects, this interpretive notice remains an interpretation adopted by the Board of Directors contemporaneously with the adoption of NFA Compliance Rule 2-29.]


                1 Article XVIII(k) of NFA's Articles of Incorporation defines futures to include "options contracts traded on a contract market, and such other commodity-related instruments as the Board may from time to time declare by Bylaw to be properly the subject of NFA regulation and oversight." Currently, the only NFA Bylaw expanding that definition is Bylaw 1507, which states that " 'futures' as used in these Bylaws shall include option contracts granted by a person that has registered with the Commission under Section 4c(d) of the Act as a grantor of such option contracts or has notified the Commission under the Commission's rules that it is qualified to grant such option contracts." [Bylaw 1507 has since been amended to include foreign futures and options contracts and leverage transactions.]

                2 However, it must be noted that much, if not all, of the benefits to customers of the disclosures and cautionary statements required to be included in promotional material by other sections of Rule 2-29 and other disclosure statements required by CFTC and NFA Rules (e.g., the risk disclosure statements required by CFTC Rule 1.55 and NFA Compliance Rule 2-27) can be intentionally diminished in the course of oral communications with customers. To avoid that result it is expected that Business Conduct Committees will presume intentional or reckless deceit in instances where a Member or Associate specifically contradicts or downplays any disclosure statement required to be made by CFTC or NFA rules.

                3 CPOs and CTAs are, however, subject to such a requirement through the CFTC's Part 4 Rules.

                4 The Committee expects that a Member or Associate could exclude from "reasonably comparable accounts" those that were actually traded pursuant to a different trading strategy or those that were traded independently of the accounts in the program for which performance is cited. With respect to the question of independence the indicia of independence listed in the CFTC's statement of policy concerning when accounts should be aggregated for position limit purposes would be useful guides for Members, Associates and Business Conduct Committees. Statement of Aggregation Policy (1977-80 Transfer Binder) Comm. Fut. L. Rep. (CCH) 20.837 (June 13, 1979); 44 Fed. Reg. 33839.


                9004 - NFA COMPLIANCE RULE 2-30: CUSTOMER INFORMATION AND RISK DISCLOSURE

                (Board of Directors, effective June 1, 1986; revised January 3, 2011 and February 28, 2017)

                INTERPRETIVE NOTICE

                I. Introduction

                NFA Compliance Rule 2-4 requires Members to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their futures business. NFA's Advisory Committees ("the Committees") have been considering ways in which the general standard of Rule 2-4 can be further defined in order to develop uniform industrywide standards which will offer guidance to the Members. In the course of their work, the Committees noted the increasing level of commentary, in public and regulatory forums, regarding the comparability between the futures industry's "know your customer" requirements and the "suitability" rules in the securities industry. The Committees noted that suitability has a tendency to act as a recurrent red herring to criticize customer protection in the futures industry. NFA's Executive Committee also became aware of these comments and asked the Committees to study the matter and make appropriate recommendations. Based on their knowledge and experience in the industry, the Committees believe that any careful consideration of this issue should continue to take into account the important role that risk disclosure plays whenever a customer opens a futures account or selects a commodity trading advisor.

                In addressing this issue, the Committees reviewed research on the evolution of the suitability and "know your customer" doctrines in the securities industry and noted that although there are several different formulations of the rule, all are based on the same premise: that different types of securities can have widely varying degrees of risk potential and serve very different investment objectives. For that reason, the securities suitability rules are cast in terms of the suitability of a particular transaction.

                The Committees noted that the futures industry differs from the securities industry in several crucial ways. Most importantly, futures contracts in general are recognized as highly volatile instruments. It therefore makes little sense to presume that a certain futures trade may be appropriate for a customer while others are not. An appreciation of the risks of futures trading must be gained and a determination of its appropriateness made at the time each customer makes a decision to trade futures in the first place. This is true regardless of whether the customer will rely on recommendations by futures professionals or the customer will make his or her own trading decisions.

                The futures industry has traditionally met this need through risk disclosure designed to encourage the customer to make an informed decision as to whether futures trading is suitable for that customer. The Risk Disclosure Statement and the Options Disclosure Statement mandated by CFTC Regulations 1.55 and 33.7, respectively, and the Disclosure Document required by the CFTC Part 4 Regulations each are designed to bring the suitability issue to the customer's attention.1

                In the specific area of exchange-traded options, the CFTC has previously noted the importance of risk disclosure and the need for the futures professional to learn enough about the customer in order to provide risk disclosure. When the Options Disclosure Statement requirement was enacted in 1981 as part of the options pilot program, the CFTC stated in its Federal Register release [46 Fed. Reg. 54500 (1980-82 Transfer Binder) Comm. Fut. L. Rep. (CCH) 21,263] that:

                  ". . . the FCM must acquaint itself sufficiently with the personal circumstances of each option customer to determine what further facts, explanations and disclosures are needed in order for that particular option customer to make an informed decision whether to trade options . . . . While this requirement is not a "suitability" rule as such rules have been composed in the securities industry, before the opening of an option account the FCM has a duty to acquaint itself with the personal circumstances of an option customer."

                The CFTC went on to state that "the extent of the inquiry should be left to the prudent judgment of the FCM."

                NFA has always been concerned that allowing suitability or know your customer standards to develop outside of the self-regulatory framework carries with it the possibility that a poorly defined or inappropriate duty would be fashioned on a case-by-case basis, perhaps by an ill-considered analogy to the securities industry rules. Because NFA construes its rules on a case-by-case basis through the decisions of the Business Conduct Committee ("BCC") which is composed of informed futures professionals and non-Members, NFA is uniquely positioned to set an ethical business standard to evaluate the conduct of other Members.

                The Committees determined that the exchange of information between a new customer and a futures professional -- the customer providing personal data and the Member providing disclosure about the risks of futures trading -- was the focal point around which to structure a sound customer protection rule. On August 9, 1985, the FCM Advisory Committee released for public comment a Proposed Rule on Customer Information and Risk Disclosure. The comments received were considered in the drafting of the Rule in final form, and Rule 2-30 was adopted by NFA's Board on November 21, 1985. In 2010, in an effort to tighten the Rule's requirements in light of the changes in the futures industry, NFA adopted modifications to NFA Compliance Rule 2-30 that: (1) expand the customers covered by the rule to reach all non-ECPs rather than just individuals; (2) require Members to at least annually refresh customer information and reassess appropriate risk disclosure, including a determination of whether futures trading is too risky for the customer, based on any materially changed information; and (3) prohibit Members and Associates from making individualized recommendations to those customers whom the Member or Associate has or should have advised that futures trading is too risky for them. 

                When the CFTC declined in 1978 to adopt a "suitability" rule, after releasing a proposed rule for comment, it stated that it was unable "to formulate meaningful standards of universal application." [43 Fed. Reg. 31886 (1977-1979 Transfer Binder) Comm. Fut. L. Rep. (CCH) 20,642]. NFA found the same difficulty, and for that reason the Rule is premised on NFA's conclusion that the customer is in the best position to determine the suitability of futures trading if the customer receives an understandable disclosure of risks from a futures professional who "knows the customer." NFA believes that the approach taken in Rule 2-30 is preferable to one which would erect an inflexible standard that would bar some persons from using the futures markets.

                II. Section-by-Section Analysis

                Section (a): General Rule

                Rule 2-30 is intended to define "high standards of commercial honor and just and equitable principles of trade" as applied to a Member's procedures for exchanging information with new futures customers at the time they become customers2. Section (a) sets forth the basic requirement: obtain information and provide risk disclosure, which includes the disclosures required by the Rule plus, in some cases, additional disclosure. Rule 2-30 is a "know your customer" rule; however, it does not require the Member or Associate to make the final determination that a customer should be barred from futures trading on suitability grounds.

                NFA's enactment of the Rule 2-30 should not be construed to expose Members to increased potential liability for damages in customer litigation or reparation proceedings, for several reasons. First, a business conduct standard promulgated by a self-regulatory organization does not create a private cause of action. Furthermore, Rule 2-30 is not an antifraud rule. In order to prove a violation, there is no requirement to prove any intent to deceive on the part of the Member. Therefore, evidence of a violation of Rule 2-30 would not in and of itself constitute evidence of a violation of any antifraud rule or statute. Finally, to the extent that personal information about a customer is germane to the issues in a reparations or arbitration case, it is undoubtedly already being considered even in the absence of a formal rule requiring Members to obtain it.

                Section (a) provides that the Rule applies to all individual customers and any other customers who are not eligible contract participants (as defined in Section 1a(18) of the Act), including all parties to a joint account. Members should be aware that regardless of whether they collect information from certain non-individual customers pursuant to Rule 2-30, accounts opened by business entities such as corporations and partnerships may also present other concerns (such as compliance with NFA Bylaw 1101, which prohibits Members from transacting customer business with non-Members who are required to be registered).

                Section (b): Customer Information - Frequency

                For customers who are individuals, the Member's obligation to obtain information and provide risk disclosure under the Rule is not limited to the first time the customer establishes a futures account with the Member. At least annually, the FCM Member that carries the customer account is also required to request updated information from any active customer who is an individual. The term active customer means any customer who was entitled to a monthly account statement under the provisions of CFTC Regulation 1.33(a) at any time during the preceding year3. Members may satisfy this requirement by contacting the customer in writing (by electronic or any other means reasonably designed to reach the customer) and requesting that the customer notify the Member of any material changes to the information provided under Section (c) of Rule 2-30.4 Absent advice to the contrary from the customer, the information previously provided is deemed verified. Whenever the customer notifies the FCM Member carrying the customer's account of any material changes to the information (whether through the update process or through the customer's own initiative), a determination must be made as to whether additional risk disclosure is required to be provided to the customer based on the changed information. If another FCM or IB introduces the customer's account on a fully disclosed basis or a CTA directs trading in the account, then the carrying FCM must notify that Member of the changes to the customer's information. Consistent with Section (e) of this Rule, the Member or Associate who currently solicits and communicates with the customer is responsible for determining if additional risk disclosure is required to be provided based on the changed information. In some cases, this may be the Member introducing or controlling the account; in other cases, it may be the carrying FCM.

                Section (c): Information To Be Obtained

                Item (1) is essentially the information required by CFTC Regulation 1.37(a), which applies to FCMs and IBs. Item (2) includes estimated annual income and net worth or net assets. For individuals, Members must obtain both estimated annual income and net worth. For all other customers, Members must obtain estimated annual income and net worth or net assets, however, if the customer is unable to provide a current estimated annual income figure, the Member may satisfy the Rule by obtaining the customer's previous year's annual income. Item (3), the customer's age or date of birth (for individuals), helps the Member put the customer's financial condition, ability to understand and level of sophistication into perspective. Information about previous futures trading experience and securities or options trading experience may also be relevant and, therefore, have been included. The information set forth in items (6) through (10) must be obtained if a customer who is an individual trades security futures products.

                Information on age, estimated annual income and net worth may be obtained through the use of brackets or "in excess of" descriptions so long as these are reasonably designed to elicit the required information in a meaningful manner.

                The information specified in Section (c) is a minimum requirement, intended to serve as a core of basic information that should always be obtained. Some Members routinely elicit additional items, such as liquid net worth, risk capital, or number of dependents, which may be quite useful, and NFA received comments on the Rule when it was drafted in 1985 suggesting that these items be required by the Rule. NFA concluded, however, that the better approach was to adopt a Rule that would specify the minimum required information and allow Members to obtain other information as they deemed appropriate. Therefore, item (5) specifies that the Member or Associate should obtain any other information used or considered to be reasonable in providing the customer with adequate disclosure of the risks of futures trading.

                Section (d): Risk Disclosure

                The risk disclosures incorporated into this Section are required by CFTC Regulations. (There are other disclosures required by CFTC Regulations, such as the Regulation 32.5 dealer options disclosure statement and the Regulation 190.10(c) disclosure statement for non-cash margin, which may apply to particular accounts.) These disclosures are only the minimum required. NFA believes that the decision with respect to what additional disclosure, if any, should be given to the customer is best left to the Member or Associate, whose conduct is subject to review by the BCC. There may be some customers for whom the additional disclosure will portray futures trading as too risky for that customer. In these instances, the only adequate risk disclosure by the Member and Associate is that futures trading is too risky for that customer. However, NFA believes that a determination of who those customers are cannot be made except on a case-by-case basis, because no objective criteria can be established that will apply to all customers. The essential feature of the Rule is the link between "knowing the customer" and providing risk disclosure. Once that has been done and the customer has been given adequate disclosure, the customer is free to make the decision whether to trade futures and the Member is permitted to accept the account. Members and Associates, however, are prohibited from making individualized recommendations to any customer for which the Member or Associate has or should have advised that futures trading is too risky for that customer.

                Section (e): Introduced and Third-Party Controller Accounts

                The purpose of this Section is to place the obligation to obtain information and provide risk disclosure on the Member who deals directly with the customer when an account is introduced to a carrying FCM by an IB or another FCM doing business on a fully disclosed basis, or when a CTA controls the trading in a customer's account pursuant to written authorization. NFA believes that the Member or Associate who solicits the customer and communicates with the customer in the process of the account opening is the appropriate party to comply with the Rule. In some cases, this may be the Member introducing or controlling the account; in other cases, it may be the carrying FCM.

                Of course, each Member remains responsible for compliance with all applicable CFTC Regulations and NFA Requirements. For example, an FCM (or, in the case of an introduced account, the IB) must furnish a Regulation 1.55 Risk Disclosure Statement to each customer, including those whose accounts were solicited by and will be traded by CTAs. Similarly, a CTA must deliver a Disclosure Document to each customer, including those who were solicited by the FCM. Section (i), which is discussed below, clarifies each Member's obligation to comply with other requirements.

                Section (f): Reliance on the Customer as the Source of the Information

                Some Members confirm financial data because of concern about the creditworthiness of the customer. NFA believes, however, that the decision whether to confirm customer data is best left to the Member's sound business judgment and is irrelevant to a customer protection rule aimed at providing information to a customer.

                Rule 2-30 contemplates a good faith exchange of information between the customer and the Member or Associate. A customer who gives incorrect information would still receive all the required risk disclosure statements but would have impaired the Member's ability to consider fully the customer's ability to understand the risk disclosures or whether additional disclosure was necessary. However, Section (f) will not operate as a "safe harbor" for a Member or Associate who falsifies information or who induces or suggests falsification by the customer. Information invented by the Member or Associate does not constitute "information about the customer" as required by the general rule. Members and Associates engaging in such conduct will be subject to appropriate disciplinary action.

                Section (g): Recordkeeping: Customers Who Decline to Provide Information

                In order to allow NFA to audit for compliance with the Rule, Section (g) requires that a timely record be made or obtained which contains the information obtained from the customer. Customers who decline to provide information (beyond that required by CFTC Regulation 1.37(a), which must always be obtained) may still open accounts, but NFA would expect Members to take appropriate action upon learning that an inordinate number of a particular Associate's customers apparently "decline" to provide basis information. Because Section (a) imposes an affirmative duty on Members to obtain information, a Member who engages in (or allows Associates to engage in) a course of conduct which is designed to or has the effect of eliciting or prompting refusals by customers to provide that information would not have discharged that duty and could not use Section (g) as a shield from disciplinary action.

                The approval requirement has been broadened to apply to all new accounts. This is consistent with the Member's responsibility to supervise the futures activities of its employees diligently pursuant to NFA Compliance Rule 2-9.

                In the case of non-U.S. customers (those who neither reside in nor are citizens of the United States) a record that the customer declined to provide the information need not be made.

                Section (h): Review Procedures

                The requirement that a Member establish adequate review and compliance procedures provides Members with the flexibility to design procedures that are tailored to the way the Member does business. NFA's audit staff will, in the routine course of an examination, check these procedures for adequacy, taking into account the facts and circumstances of the particular Member.

                Section (i): Relationship to Other Requirements

                Rule 2-30 incorporates certain CFTC Regulations, but its requirements are in addition to any imposed by those Regulations or other NFA Requirements. For example, the Rule requires a CTA to provide a Disclosure Document, if required to do so by CFTC Regulation 4.31, at the time a customer first authorizes the Member to direct trading in a futures account for the customer.

                This is because Rule 2-30 is intended initially to apply to "account opening" or its equivalent. However, CFTC Regulation 4.31 requires that the Disclosure Document be delivered at the time of solicitation. Other examples of CFTC Regulations which affect the process covered by the Rule have been cited in the discussion of Sections (b), (d), (e) and (g) above. Section (i) serves to clarify the ongoing obligation of Members to comply with all CFTC Regulations and NFA Requirements.


                1 The risk disclosure statements required by CFTC Regulations 1.55 and 4.31 direct the customer to "carefully consider whether [futures] trading is suitable for you in light of your financial condition": the one required by CFTC Regulation 33.7 informs the customer that "commodity option transactions are not suitable for many members of the public."

                2 NFA Bylaws define "futures" to include domestic exchange-traded options and dealer options. See Compliance Rule 1-1(g).

                3 For any customer who was not considered active at the time of the annual update of information, the Member who currently solicits and communicates with the customer must refresh the customer information prior to accepting any new funds or orders from the customer.

                4 If the customer informs the FCM that he/she cannot verify the information because the information previously provided to the carrying FCM is not currently available to the customer, then the carrying FCM shall promptly provide any necessary information to the customer.

                 


                9005 - NFA COMPLIANCE RULE 2-4: GUIDELINES FOR THE DISCLOSURE BY FCMS AND IBS OF COSTS ASSOCIATED WITH FUTURES TRANSACTIONS

                (Board of Directors, effective June 1, 1986; revised July 24, 2000)

                INTERPRETIVE NOTICE

                National Futures Association ("NFA") Compliance Rule 2-4 provides that "Members and Associates shall observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business." NFA Compliance Rule 2-4 requires that each FCM Member, or in the case of introduced accounts, the Member introducing the account make available to its customers, prior to the commencement of trading, information concerning the costs associated with futures transactions.1

                If fees and charges associated with futures transactions are not determined on a per trade or round-turn trade basis, the Member must provide the customer with a complete written explanation of such fees and charges.

                NFA recognizes that FCM and IB Members may employ various arrangements in assessing fees and charges associated with futures transactions to customers. Any such arrangement which is intended to or is likely to deceive customers is a violation of NFA Requirements and will subject the Member to disciplinary action.


                1 NFA Bylaws define "futures" to include exchange-traded options. See NFA Compliance Rule 1-1(l).


                9006 - NFA COMPLIANCE RULE 2-13: GUIDELINE FOR THE DISCLOSURE BY CPOS AND CTAS OF "UP FRONT" FEES AND ORGANIZATIONAL AND OFFERING EXPENSES

                (Board of Directors, effective July 1, 1986; revised November 26, 1996.)

                INTERPRETIVE NOTICE

                Commodity Futures Trading Commission ("CFTC") Regulation 4.24(i) states that the disclosure document of a CPO must contain a description of each expense which has been or is expected to be incurred by the pool. CFTC Regulation 4.34(i) applies to CTAs and requires that the disclosure document of a CTA describe each fee which the CTA will charge the client. In addition, CFTC Regulations 4.24(w) and 4.34(o), respectively, require CPOs and CTAs to disclose all "material" information. These requirements have been incorporated into NFA Compliance Rule 2-13. Because "up front" fees and charges can have a significant impact on the net opening equity of pools and managed accounts, the above NFA rule requires not only disclosure of the existence and the amount of the up front charges but also disclosure of how the up front charges affect the return which must be achieved to break even at the end of an investor's first year or the initial amount of capital available for trading. Furthermore, the impact of the up front charges on net performance must be included in the rate of return figures reflected on a CPO's or CTA's required past performance presentation.

                A. Disclosure of Prospective Up Front Fees and Charges

                The disclosure document must disclose up front fees and expenses, if any, to participants in a pool or clients in a managed account. NFA's Board of Directors believes that investors should be fully aware of not only the amount of such fees and expenses but also their impact on the return which must be achieved to break even at the end of the investor's first year or the net proceeds that will be available at the outset for futures trading. For a CPO, NFA Compliance Rule 2-13(b) provides that a CPO's disclosure document must include break-even analysis presented in the manner prescribed by NFA's Board of Directors, which is described in a separate interpretive notice. (See Interpretive Notice Compliance Rule 2-13: Break-Even Analysis.) CTAs may provide similar information either through the use of break-even analysis which complies with the requirements of Compliance Rule 2-13(b) and the accompanying interpretive notice or through the use of a dilution table.

                If a CTA chooses to use a dilution table, the dilution table should be highlighted in a tabular format on the cover page of the disclosure document. The suggested format for the table would detail a standardized amount of initial investment, all up front fees and charges, including all sales and administrative fees, and the net proceeds that would be available for trading after deducting the up front expenses. If a CTA does not use standardized amounts, minimums or units for initial investments, the required table should be presented showing dilution of an investment of $1,000. Moreover, if the results in the dilution table, without further explanation, could be materially misleading as to the impact of the up front fees and charges on the amount of initial capital available for trading (for example, because the fees as a percentage of the initial investment vary depending on the amount of the investment), then explanatory footnotes should be used.

                The extent to which a CTA breaks down the up front expenses into categories, including, but not limited to, fees, sales and administrative fees, is solely within the discretion of the CTA as long as the net proceeds for trading and the portion that is deducted from the initial investment are clearly delineated as such. All fees that are charged up front must be disclosed except that a CTA that charges periodic management fees on the first day of each period, including the initial period, need not describe such fees for the first period in the dilution table.

                B. Treatment of Up Front Fees in the Required Past Performance Presentation

                In preparing rate of return information, the beginning net asset value of a pool or managed account must be calculated before any up front fees and expenses, including organizational and offering expenses, are deducted. However, a CTA acting as an independent advisor to a commodity pool is not required to include the up front fees or expenses charged by the CPO in beginning net asset value for the purposes of calculating rate of return information for the CTA's own disclosure document. In general, a CTA is acting as an independent advisor if it is not an affiliate of the CPO and does not receive any portion of the up front fee. For these purposes, "affiliate" means any advisor which owns or controls, is owned or controlled by, or is under common ownership or control with the CPO.

                All up front fees and organizational expenses must be reflected as a reduction of net performance in the period in which the contribution was made to the pool or client's managed account, unless such fees and expenses can be amortized pursuant to Generally Accepted Accounting Principles.1 If organization or syndication expenses can be, and are, amortized, then net performance shall be reduced each month by the monthly amortizable amount. The monthly amortizable amount shall be calculated by dividing the total amount of amortizable expenses by the total number of months over which such expenses shall be amortized.


                1 Section 709 of the Internal Revenue Code, 26 U.S.C. §700, governs whether or not organization or syndication expenses incurred to organize and to promote the sale of interests in a partnership can be amortized.


                9007 - COMPLIANCE WITH NFA BYLAW 1101

                (Staff, March 19, 1987; revised July 1, 2000)

                INTERPRETIVE NOTICE

                Mandatory membership in NFA is the cornerstone of NFA's regulatory structure. From the earliest stages of its formation, NFA's founders recognized that the creation of a meaningful and effective industrywide self-regulatory organization would be completely impossible unless all persons required to be registered as FCMs, IBs, CPOs or CTAs were required to be Members. The founders of NFA considered the issue to be of such critical importance that they not only prohibited the conduct of customer business with non-Members through NFA Bylaw 1101, but included that prohibition as one of NFA's fundamental purposes in Article III, Section 1(f) of NFA's Articles of Incorporation.

                Given the importance of the mandatory membership concept, NFA Bylaw 1101, which tracks the language of Article III, Section 1(f), states the prohibition in the strongest possible terms. [See Bylaw 1101.]

                The rule by its terms imposes strict liability on any Member conducting customer business with a non-Member that is required to be registered. The rule does not require proof that the Member firm was at fault or failed to exercise due diligence, simply that it transacted customer business with a non-Member that is required to be registered. NFA Bylaw 1101 requires Members to make two determinations: whether it is doing business with an entity which is required to be registered, and if so, whether that person is a Member of NFA. The second of these determinations is relatively simple. Any Member can check the BASIC system on NFA's web site at www.nfa.futures.org, send a request to NFA through the "contact" feature of the web site, or call NFA's Information Center at a toll-free number (800) 621-3570 to receive current and accurate information concerning the membership status of any person. The determination of whether a particular person is required to be registered can obviously be much more difficult. Any Member could, despite its best efforts, be transacting customer business with a person who is actually required to be registered as an FCM, IB, CPO or CTA. In such a case, the Member is in technical violation of the strict liability terms of NFA Bylaw 1101.

                A review of NFA policy, procedures and past disciplinary actions, however, clearly indicates that NFA Bylaw 1101 has not been enforced unreasonably. In making its recommendations in cases involving apparent Bylaw 1101 violations, staff has consistently not relied on the strict liability standard set by the rule itself. Staff has recommended the issuance of complaints in Bylaw 1101 cases in which the evidence indicates that the Member knew or should have known of the violation. Of course, under NFA Compliance Rules, the ultimate decision of whether a particular violation of NFA Rules warrants prosecution rests with the Members of NFA's Business Conduct Committee ("BCC"). BCC Members exercise their informed business judgment in making these decisions, and are certainly aware that some violations of Bylaw 1101 may occur in spite of reasonably diligent efforts to comply with the rule.

                The question of whether a Member should have known of a violation of NFA Bylaw 1101 depends in large part on the adequacy of its procedures to prevent such violations. Though it would be impossible to describe all of the situations which should put a Member on notice that a particular person is required to be a Member or NFA, there are certain minimal steps which should be taken to reduce the possibility of a violation of NFA Bylaw 1101:

                  1. FCM Members should ensure that all omnibus accounts they carry are held by FCM Members of NFA;
                  2. Each Member should review the list of CFTC registrants with which it does business to determine if they are NFA Members. A Member can determine whether a particular entity is a CFTC registrant by checking the BASIC system on NFA's web site located at www.nfa.futures.org, sending a request to NFA through the "contact" feature on the web site, or calling NFA's Information Center toll-free at (800) 621-3570.
                  3. Each Member should review its list of customers. If a customer's name indicates that it may be engaged in the futures business, the Member should inquire as to its registration and membership status;
                  4. When a FCM or IB Member carries an account controlled by a third party (other than an AP of the FCM or IB or a member of the same family as the account owner), the FCM or IB Member should check to see if the account controller is registered as a CTA and, if not registered, should inquire as to the basis of any exemption and, if applicable, should verify that account controller has made the required filings with the CFTC and NFA;
                  5. If any customer is operating a commodity pool but claims to be exempt from registration as a CPO, the Member should verify that the customer has made the required filings with the CFTC and NFA;
                  6. Members should ensure that their branch offices are not separately incorporated entities. The CFTC Division of Trading and Markets has issued an interpretive letter stating that branch offices which are separately incorporated entities are required to be registered as introducing brokers; and
                  7. FCM Members should determine whether non-Member foreign brokers for whom the Member carries accounts solicit U.S. customers for transactions on U.S. exchanges.

                As mentioned above, these suggested steps do not purport to be a dispositive list of internal procedures required to prevent violation of NFA Bylaw 1101. Though under some circumstances a Member following these suggestions could still be found liable for a violation of NFA Bylaw 1101, the suggested procedures should help foster compliance with NFA Bylaw 1101 and greater protection to the investing public.


                9008 - RESERVED


                9009 - NFA COMPLIANCE RULE 2-29: REVIEW OF PROMOTIONAL MATERIAL PRIOR TO ITS FIRST USE

                (Staff, May 1, 1989; revised July 1, 2000)

                INTERPRETIVE NOTICE

                As a service to its Members and the investing public, NFA offers a program for the review of promotional material prior to its first use. This program is voluntary and no Member must file promotional material with NFA unless otherwise required to do so by rule or directive. In addition, this program in no way lessens the requirement that Members supervise the preparation of and review all promotional material. Members may not attempt to use NFA staff's review as a substitute for its own.

                Members wishing to avail themselves of the pre-review program may submit promotional material to the Compliance Department at least 21 calendar days prior to its first intended use. This material should be directed to:

                  National Futures Association
                  Compliance Department
                  Advertising Regulation Team
                  Suite 1800
                  300 S. Riverside Plaza
                  Chicago, IL 60606

                In addition, Members may ask general questions about promotional material or Compliance Rule 2-29 by contacting NFA's Information Center at (312) 781-1410 or (800) 621-370 or through the "contact" feature of NFA's web site at www.nfa.futures.org. Such inquiries will be forwarded to the appropriate personnel for response.

                Submitted material must be accompanied by a cover letter signed by a supervisory employee responsible for the review of the Member's promotional material. NFA staff will not pre-review material received directly from APs.

                NFA staff will review submissions as expeditiously as possible. If additional information is needed, or the review cannot be completed within the 21 day period, the Member will be so notified. (In our experience, most reviews take far less than 21 days, and reviews take more than 21 days only in highly unusual circumstances.) At the conclusion of the review the comments of NFA staff will be conveyed to the Member, generally by telephone. Obviously NFA staff will not be able to independently verify the accuracy of every statement or numerical claim made in a piece of promotional material within the 21 day review period; that responsibility remains with the Member. Therefore, submitting promotional material to NFA will not provide a "safe harbor" for Members if misstatements or omissions of material facts are discovered subsequently. However, NFA staff review will provide valuable guidance to Members, particularly with regard to such areas as balance and the proper use of disclaimers.


                9010 - INFORMATION AVAILABLE FROM NFA REGARDING BACKGROUND OF PROSPECTIVE EMPLOYEES

                (Staff, August 21, 1989; revised July 1, 2000)

                INTERPRETIVE NOTICE

                NFA Compliance Rule 2-9 requires Members to supervise diligently the futures-related activities of their employees and agents. Obviously, all Members should carefully screen prospective APs, both to ensure their qualifications and to determine the extent of supervision the prospective AP would require if hired. The purpose of this Notice is to remind you of the information available from NFA to aid Members in that effort.

                All applicants for AP registration are required to fill out the Form 8-R, supplying, among other things, information concerning their recent employment history and any disciplinary proceedings against them. What may not be immediately apparent from the face of the application is whether any of the applicant's previous employers have been the subject to disciplinary proceedings by the Commission or by NFA. This information could be helpful to a prospective employer in determining the extent of supervision a particular applicant would require after he is hired. Certainly, if a recently hired AP has received the bulk of his professional training and experience from, for example, a number of firms which have been closed down as a result of disciplinary proceedings brought by the Commission or by NFA, that individual may well require closer supervision for a period of time than other APs.

                If you have any questions whether the Commission or NFA has taken any action against a particular firm or individual, check the BASIC system on NFA's web site at www.nfa.futures.org, send a request to NFA through the "contact" feature of the web site, or call NFA's Information Center at (800) 621-3570. Summary information concerning the proceeding is available through BASIC or can be provided over the phone, and copies of any available documents relating to the proceeding can be provided upon request.

                Prospective employers are also entitled to any non-public registration records regarding a prospective employee. For example, each applicant for registration as an AP must complete the disciplinary history portion of the Form 8-R, and must supply a detailed explanation of any "yes" answers to those questions. That detailed explanation is treated as non-public but is available to prospective employers under NFA Registration Rule 701(c). Thus, a prospective employer may obtain the non-public supplementary information which the applicant may have submitted in connection with any past registrations.

                The supervision of employees must be an issue of paramount concern to all NFA Members. NFA recognizes that certain employees, by virtue of their past training or experience, may need more supervision than others and will gladly supply our Members with whatever information may be available to help identify those employees.


                9011 - NFA BYLAWS 515, 708 AND 802: NFA REQUIREMENTS WHICH CONSTITUTE DISCIPLINARY OFFENSES.

                (As of January 1, 2010)

                NFA Bylaws 515, 708 and 802 set qualification standards for individuals serving on the Board, disciplinary committees, and arbitration panels and incorporate the disqualification standards in CFTC Regulation 1.63. Under those Bylaws and CFTC Regulation 1.63, individuals who violate the following rules are automatically disqualified from serving on the Board, disciplinary committees, and arbitration panels for at least three years.

                1. Bylaws:

                  Bylaws 301(a)-(d), 513 through 516, 703, 704, 706 through 708, and 1101.

                2. Compliance Rules:

                  Rules 2-2 through 2-7, 2-8(a)-(c), 2-9, 2-10(b) and (d)(4)-(5), 2-11, 2-13, 2-22 through 2-27, 2-29(a)-(e), (h), and (j), 2-30, 2-31, 2-32, 2-34(a) and (c)-(d), 2-35, 2-36, 2-37(a)-(c) and (g), 2-38(a), 2-39, 2-40, 2-41, 2-42, 2-43, 2-44, and 2-45.

                3. Financial Requirements:

                  Sections 4, 14, and 15.

                4. Registration Rules:

                  Rules 208, 210(a)-(b), 211, 301(c) and (d)(2), and 302(c) and (d)(2).

                [NOTE: Individuals are also disqualified from serving on the Board, disciplinary committees, and arbitration panels if they violated certain requirements that have since been repealed and the disqualification period is still in effect. These requirements are former Compliance Rules 2-15 through 2-17, 2-19 through 2-20, and 2-28 and former Registration Rule 205.]


                9012 - RESERVED


                9013 - NFA COMPLIANCE RULE 2-30: CUSTOMER INFORMATION AND RISK DISCLOSURE

                (Staff, November 30, 1990; revised July 1, 2000)

                INTERPRETIVE NOTICE

                NFA's Know-Your-Customer Rule, which deals with customer information and risk disclosure, has been in effect since June 1, 1986. As drafted by NFA's Advisory Committees and approved by the Board of Directors, the Rule was designed to accomplish two primary objectives:

                  1. to define "high standards of commercial honor and just and equitable principles of trade" as applied to Member procedures for exchanging information with new customers who are individuals; and
                  2. to provide a useful tool to combat any unscrupulous firms attempting to take advantage of unsophisticated investors.

                Given these broad purposes, some of the Rule's provisions are very specific, while others, of necessity, are more general. Since some of the Rule's provisions are stated in general terms, Members may understandably seek more specific guidance on some points. The best sources for such guidance are the Interpretive Notice to Rule 2-30 ("Interpretive Notice")1, and the decisions NFA's Regional Business Conduct Committees ("BCCs") and Hearing Panels have made in specific disciplinary cases which allege violations of the Rule. The purpose of this Notice is to provide Members with additional guidance in complying with Rule 2-30 by summarizing how the BCCs have applied Rule 2-30 since the Rule became effective in 1986.

                Since Rule 2-30 became effective, a number of complaints have been filed by NFA which allege violations of the Rule. Typical violations of the Rule generally fall into one of three categories.

                  1. failing to give additional risk disclosure when required or disguising the fact that additional risk disclosure may be required by inducing customers to provide false information on their account opening papers;
                  2. violations of recordkeeping requirements; and
                  3. violations of supervisory requirements.

                A description of typical violations in each category is set forth below.

                Inadequate Risk Disclosure

                The heart of Rule 2-30 is the requirement that Members obtain certain basic information from the customer concerning his financial background, analyze that information and ensure that the customer has received adequate risk disclosure information. As discussed in the Interpretive Notice, some customers may require risk disclosure in addition to that specifically prescribed by Rule 2-30(d)2. For example, there may be instances where, for some customers, the only adequate risk disclosure is that futures trading is too risky for that customer. Once adequate disclosure is given, however, the customers are free to decide whether to trade in futures and the Member is free to accept the account. The Rule recognizes that the identification of customers who require additional risk disclosure can only be done on a case-by-case basis and that the determination of whether additional risk disclosure is required for a given customer is best left to the Member firm, subject to review by the BCCs.

                The most serious violations of the Rule have involved either failing to provide additional risk disclosures when necessary or inducing customers to provide false information on their account opening forms. A number of the more egregious cases, which have generally resulted in expulsions from NFA membership, are summarized below. The exact factual circumstances vary from case to case, but one common thread in these cases is that the customer had no previous futures trading experience and little, if any, other investment experience. Obviously, these extreme examples do not in any way limit the circumstances which may trigger a need for additional risk disclosures:

                • An AP instructed a customer, who noted on his account opening forms that he had owned his own home for 18 years, to falsify his account application by indicating that he had been involved in real estate development for 18 years.

                • An AP solicited a 52-year-old retired Air Force Colonel who had no prior commodity trading experience. The AP did not advise the customer of any specific numbers to put down on his account opening form regarding his net worth, but told him to make the numbers high enough to get the account approved.

                • An AP solicited a 32-year-old nurse and her husband, a 39-year-old computer operator, neither of whom had any prior investment experience in commodities or securities. The customers repeatedly informed the AP that they could not afford a minimum required investment of $10,000. The AP told them to take out a loan from their credit union and that the required investment amount would then be reduced to $5,000. The customers subsequently took out a $3,000 loan from their credit union and added $2,000 from their savings account to meet the $5,000 minimum investment requirement. The husband then went to the firm's office and signed the account forms during his 30-minute lunch break; however, he did not read the forms, nor were they explained to him by the firm or its AP.

                • An AP instructed a customer to inaccurately complete his account application by stating that he was a foreman rather than a factory laborer, and by indicating that he had liquid assets in the amount of $51,000 instead of $20,000. Another of the firm's APs told a customer that his actual annual income of $12,500 was too low and that if he did not change that figure to read between $20,000 and $40,000, his account would be rejected.

                • A customer who had been unemployed for two years, with a net worth of $30,000 derived from an inheritance and sale of property and no futures trading experience, was instructed by an AP to "put down anything" on the account opening form regarding her employment and income. The customer received no risk disclosure other than the Risk Disclosure Statement required by CFTC Regulation 1.55. In addition, the AP neither explained the account documents to the customer, nor gave her sufficient time to review them.

                • An AP solicited a 77-year-old retired real estate investor with a net worth of $100,000 and a fixed annual income of $20,000. The customer informed the AP that both he and his wife were in ill health and that one of the reasons for his interest in investing in commodity futures contracts was his limited health insurance coverage and a desire to earn enough money to pay for his medical expenses. Rather than providing the customer with risk disclosure in addition to that contained in the risk disclosure statements, the AP informed the customer that the risk of loss involved in futures trading was slight. Another of the firm's APs instructed a customer not to put down "unemployed actor" for his occupation but rather "self-employed." This AP also advised the customer to include a net worth figure on his account forms which was sufficiently high to insure the opening of the account, and for the income figure, to put down his income prior to becoming unemployed.

                Again, the cases summarized above illustrate some of the more egregious violations of the Rule involving either inadequate risk disclosure or inducing customers to provide false information on their account opening forms. However, because the determination of whether additional risk disclosure is required for a given customer can be made only on a case-by-case basis, the above scenarios should not be interpreted to limit the circumstances under which additional risk disclosure may be required.

                Recordkeeping and Supervisory Requirements

                Though risk disclosure is the heart of the Rule, Compliance Rule 2-30 also imposes certain recordkeeping and supervisory requirements. Violations of these requirements typically involve a failure to obtain all of the information required under the Rule (i.e., occupation, current estimated annual income and net worth, approximate age and previous investment and futures trading experience) or a failure to retain the appropriate records. Although the Rule 2-30 recordkeeping violations have never formed the sole basis of disciplinary actions, they generally are indicative of a widespread recordkeeping problem within the firm.

                Rule 2-30(h) requires each Member to "establish and enforce adequate procedures to. . . supervise the activities of its Associates in obtaining customer information and providing risk disclosure." One case alleging a violation of Rule 2-30(h) involved the failure of a firm's account opening procedures to require that the firm's APs obtain the necessary information from the customer. Another case involved a firm whose APs failed to follow guidelines provided to the firm by its guarantor in order to determine whether a prospective customer needed additional risk disclosure. Rule 2-30(h) does not require Members to provide their APs with any sort of grid-like formula to identify those customers who require additional risk disclosure; however, the Rule, as applied by the BCCs and Hearing Panels, does require that a firm be able to articulate the general factors its APs are instructed to consider in determining whether additional risk disclosure is required.

                In conclusion, NFA recognizes that certain provisions of Compliance Rule 2-30 are stated in general terms. Since the law in this area is developed on a case-by-case basis by NFA's Hearing Panels, no precise formula is available to Members to aid them in their interpretation of the Rule. However, in addition to the Interpretive Notice, Members may obtain guidance regarding the Rule's application by reviewing the case summaries described above. As the case law in this area continues to develop, NFA will keep Members apprised of any changes in the Rule's application.


                1 See NFA Manual at 9004.

                2 See NFA Manual at 9004.


                9014 - NFA COMPLIANCE RULE 2-4: CONFIDENTIALITY LANGUAGE IN RELEASE AGREEMENTS

                (Staff, February 7, 1991; revised December 17, 2007)

                INTERPRETIVE NOTICE

                NFA has become aware of a practice utilized in the settlement of customer complaints and arbitration proceedings whereby, as a condition of settlement, a customer is required to sign a release which limits their ability to cooperate with regulatory authorities. The language being utilized goes beyond the general confidentiality language requiring that no public statement be released with respect to the terms of the settlement. Although the scope of the language in each release differs, it is apparent that the language being incorporated by some firms requires the customer to refrain from releasing or disclosing any information to regulatory bodies except as required by court order or as otherwise required by law.

                The plain meaning of such language would bar the customer from cooperating with NFA. NFA has encountered this situation in the course of conducting investigations into apparent violations by Members. Customers have been reluctant to provide information and testimony because of this type of confidentiality provision in their agreements, therefore frustrating the effectiveness of the NFA enforcement process.

                While the practice of including language prohibiting the disclosure of settlement terms is acceptable, the use of language which clearly bars customer cooperation with NFA is not. Including such language in settlement agreements is viewed by NFA as an unethical practice and a failure to observe high standards of commercial honor and just and equitable principles of trade.

                Therefore, NFA staff has recommended and an NFA Regional Business Conduct Committee has charged a violation of NFA Compliance Rule 2-4 when language which prohibits the customer from cooperating with NFA is used as a term of settlement. NFA staff will continue to recommend that a violation of NFA Compliance Rule 2-4 be charged when this language is used.

                The Financial Industry Regulatory Authority ("FINRA") has also encountered the use of this language by some of its members. In response, the FINRA issued a notice informing its members that this practice may be viewed as unethical and would constitute a violation of FINRA rules.

                An agreement containing language restricting the release of information to regulatory or law enforcement agencies may also be found to be void as against public policy by state courts. The public policy concern is implicated because the scope of this language goes beyond the private rights of the individuals involved by discouraging the release of information and potential evidence and interfering with the process of justice.

                While general confidentiality language in release agreements is certainly permissible, NFA staff cautions Members against the use of settlement agreements which include language limiting or prohibiting a customer from providing information and cooperating with NFA. This is not intended to impose an affirmative duty on Members to include language explicitly permitting such cooperation, but merely to avoid explicit language barring it.


                9015 - RESERVED


                9016 - NFA BYLAW 1301: NFA ASSESSMENT FEE QUESTIONS AND ANSWERS FOR FCMS

                (Staff, revised January 1, 2002; April 1, 2002; July 1, 2002; September 17, 2002; January 1, 2003; January 1, 2005; August 1, 2005; January 1, 2008; January 1, 2011; June 20, 2011; October 25, 2011; October 27, 2011; June 5, 2012; September 1, 2012; January 3, 2013; July 18, 2013; October 1, 2014; November 5, 2014; and January 16, 2015.)

                INTERPRETIVE NOTICE

                From time to time NFA receives questions from Members regarding NFA's assessment fees. Areas of frequent inquiry include the manner and frequency of payment, the proper form of invoicing the assessment fee and the applicability of the assessment fee in different situations. Following is a compilation of the most frequently asked questions and their answers. Members may wish to refer to this compilation when a question regarding assessment fees arises.

                I. Definitions

                  1. Q: What is a futures contract "round-turn"?

                  A: The term "round-turn" as used in NFA Bylaw 1301(b) is intended to include all transactions where an actual futures position is closed out or offset. This would include futures positions closed out by delivery, cash settlement, through an exchange for physicals, and as a result of the transfer to the carrying FCM from another FCM of offsetting futures contracts.

                  [Note: Although the NFA assessment fee for futures is calculated on a round-turn basis, NFA Bylaws leave Member FCMs free to invoice and accrue the fee at any point in a round-turn or to split the fee among transactions which make up a round-turn.]

                  2. Q: What is meant by "per trade" for the options assessment fee?

                  A: The term "per trade" as used in NFA Bylaw 1301(b) means a purchase or sale of an option but does not include the exercise or expiration of an option. However, if an option is exercised, NFA's assessment fee will be assessed on the underlying futures transaction on a round-turn basis.

                II. Payments

                  1. Q: How much is the NFA assessment fee?

                  A: As of October 1, 2014, the NFA assessment fee, payable by FCMs with respect to futures contracts, is $.01 per side, invoiced to customers. The assessment fee on both exchange-traded and dealer options is $.01 per side.

                  2. Q: Is there a different NFA assessment fee for futures contracts that have a very small notional value?

                  A: Yes. At its May 2012 meeting, the Board adopted an Interpretive Notice to NFA Bylaw 1301(b) entitled NFA's Assessment Fee-Diminutive Notional Value Contracts and Security Futures Products to impose a reduced NFA assessment fee upon diminutive notional value ("DNV") futures contracts. The NFA assessment fee rate for DNV contracts is $0.00008 per round-turn, with a minimum fee of $0.01 per round-turn. The Interpretive Notice further permits the Executive Committee upon application by a contract market or exempt commercial market to designate contracts as DNV contracts. Refer to the list of designated DNV contracts.

                  3. Q: What is the amount of the NFA assessment fee for security futures contracts and to which accounts is it applied?

                  A: Effective September 1, 2012, the assessment fee is $.00008 per round-turn, with a minimum fee of $.01 per round-turn. If any computation results in a fraction of a cent, the fee will be rounded to the nearest penny. NFA's assessment fee applies to security futures contracts held in a commodity futures account only.

                  4. Q: When is the NFA assessment fee payable?

                  A: The assessment fee is payable 30 days following the end of the month for all transactions effected during that month.

                  5. Q: Does NFA furnish a form for the monthly payment of NFA assessment fees?

                  A: Yes. NFA distributes an NFA Assessment Fee Summary Report each month and worksheets upon request. FCMs are required to remit NFA assessment fees on time regardless of whether forms were received by the FCM.

                  6. Q: Must NFA FCM Members submit the assessment fee worksheet and Assessment Fee Summary Report with their payment?

                  A: NFA will accept assessment fee formats which vary from the worksheet submitted to Members for their convenience. Members should be able to adequately justify and document reasons for variation from the worksheet. All FCMs are required, however, to submit the Assessment Fee Summary Report without modification.

                III. Invoicing

                  1. Q: Can an FCM combine the NFA assessment fee with commissions in its statement to customers?
                  A: No. Assessment fee amounts must be shown or included in a line item on the customer statement separate from the line item which is used to designate commissions. Such an item may be devoted exclusively to the NFA assessment fee or may include other fees (i.e., a miscellaneous fees category). If, however, the amount indicated in the line is higher than the applicable NFA assessment fee, the customer must receive notice either on the statement or in a separate document of the actual amount of the NFA assessment fee.
                  2. Q: Must an FCM invoice to the customer the NFA assessment fee?
                  A: Yes. Bylaw 1301(b)(i) requires that the assessment fee be invoiced to customers.
                  3. Q: May the assessment fee be invoiced on a monthly statement?
                  A: Yes. Although Bylaw 1301(b)(i) requires that an FCM Member invoice assessments to its customers and remit the amount due to NFA, the FCM is given some discretion as to how the customer is invoiced. Invoicing through monthly statements or purchase and sale statements are both acceptable methods.
                  4. Q: May the NFA assessment fee on futures transactions be invoiced to customers at the opening of a futures position?
                  A: Yes. The invoicing requirement of Bylaw 1301(b) does not restrict or prescribe the timing of the invoicing.

                IV. Applicability of NFA Assessment Fee

                  1. Q: Does the assessment fee apply to accounts of persons having "privileges of membership" on a contract market?

                  A: No. NFA Bylaw 1301(b)(i) makes the NFA assessment fee inapplicable to trades of customers who have "privileges of membership on a contract market where such contract is entered (except that this exemption does not apply to transactions by commodity pools operated by NFA Member CPOs)." If the exchange formally recognizes the customer as a member, the NFA assessment fee does not apply.

                  2. Q: Does the assessment fee apply to commodity pools operated by NFA Members?

                  A: Yes. If a commodity pool (exempt or non-exempt) is operated by an NFA Member and has privileges of membership on a contract market where such contract is entered, then the commodity pool is still required to pay assessment fees. The assessment fee also applies to an exempt commodity pool operated by a non-Member unless the pool has privileges of membership on a contract market.

                  3. Q: Does the assessment fee apply to proprietary accounts?

                  A: Generally, accounts belonging to affiliated firms which wholly own, are wholly owned by, or share 100 percent ownership with the FCM are exempt from paying the NFA assessment fee if the transactions are executed on an exchange where the FCM is a member. There are two exceptions to this general rule.

                  First, any account that is in the name of a commodity pool operated by an NFA Member CPO is subject to the NFA assessment fee, regardless of affiliations or exchange memberships. Second, any account where someone other than the exchange member FCM or affiliate makes deposits in the account or bears the risk of loss is subject to the assessment fee.

                  4. Q: If an FCM carries an omnibus account for another FCM which is an NFA Member, which FCM is liable to NFA for the assessment fee on trades in the omnibus account?

                  A: The originating FCM is liable to NFA.

                  5. Q: Would an FCM carrying an omnibus account ever be liable to NFA for the assessment fee on trades in the omnibus account?

                  A: Yes. If the originating broker is not an FCM Member, the carrying FCM pays the fee. This situation would arise where the originating broker is a foreign broker.

                  6. Q: Does an FCM pay an assessment fee on trades on a non-U.S. customer on a domestic exchange?

                  A: Yes. The assessment fee applies to trades on domestic exchanges without regard to the nationality or residence of the customer.

                  7. Q: Does the assessment fee apply to trades of U.S. customers on foreign exchanges?

                  A: Generally, yes. Foreign futures and options are assessed the assessment fee at the same rates applicable to domestic futures and options. There are two exceptions: 1) The "omnibus account" exemption, discussed under Part IV, question 5, applies to foreign futures and options. (A "U.S. customer" includes any customer who resides in the United States, its territories or possessions); and 2) The exemption referenced in Bylaw 1301 (b) (i) (D) (2) regarding proprietary trades of a person who has privileges of membership on certain NFA Member contract markets (irrespective of whether that person is a member of the foreign exchange; in addition, this does not apply to commodity pools operated by an NFA Member).

                  8. Q: Does the assessment fee apply to trades of non-U.S. customers on foreign exchanges?

                  A: No. Trades by non-U.S. customers on foreign exchanges are excluded from the definition of "foreign futures and options" and therefore are not subject to the assessment fee.

                  9. Q: Does an FCM pay an assessment fee on transactions which are merely bookkeeping entries such as those made to correct errors or to transfer a position from the books of one FCM to the books of another?

                  A: No. The term "round-turn" excludes offsets which do not represent an actual transaction but which are merely bookkeeping entries such as those made to correct errors or to transfer a position from the books of one FCM to the books of another.

                  10. Q: Concerning linked-market transactions, how do NFA assessment fees apply to futures positions executed on a foreign exchange (e.g., the Singapore International Monetary Exchange ("SIMEX")) to be offset against positions executed on a domestic exchange (e.g., the Chicago Mercantile Exchange ("CME")) and vice versa?

                  A: Any futures transaction that is carried as a CME trade by an FCM Member for the account of a customer (except trades which under Bylaw 1301(b) are not assessable) will be subject to an NFA assessment fee upon completion of the round-turn even though one or both sides of the round-turn may have been actually executed on SIMEX. Any transaction that is carried as a SIMEX trade by an FCM Member for the account of a U.S. customer (except trades which under Bylaw 1301(b) are not assessable) will be subject to an NFA assessment fee. Any trade that is executed on the CME but is transferred to a SIMEX member and the SIMEX clearing house through the Mutual Offset System will not be subject to an NFA assessment fee.

                  11. Q: Does the NFA assessment fee apply to Over-the-Counter ("OTC") transactions?

                  A: If the OTC transaction does not occur on or subject to the rules of a futures exchange, the NFA assessment fee does not apply. 

                  12. Q: Does the NFA assessment fee apply to transactions on the International Petroleum Exchange ("IPE")?

                  A: Unlike ICE, IPE is a futures market. Consequently, IPE trades are subject to the NFA assessment fee.


                9017 - NFA BYLAW 1301: FORMS AND PROCEDURES FOR ASSESSMENT FEE COMPUTATION

                (Staff, revised July 1, 2002)

                INTERPRETIVE NOTICE

                Following are examples of forms and instructions to which Members may wish to refer when calculating NFA assessment fees. Most Members will be sent computer-generated invoices to be completed and returned to NFA. Some Members may wish to use manual systems for calculation of the assessment fee and continue to report on the form set forth below as Schedule I. Members may also wish to refer to Schedules I and II when developing systems to determine the appropriate fee.

                If you will not be remitting an assessment fee to NFA, for example because your firm clears on a fully disclosed basis through another FCM which is remitting fees on your behalf, please complete the computer-generated invoice or Schedule I showing zero volume and fees and return it to NFA by the due date.

                Bylaw 1302 provides that assessments based upon futures transactions shall be payable to NFA within 30 days after the end of each month for the transactions effected during that month.

                Schedule I

                Schedule II

                FCM Assessment Fee Worksheet Instructions

                NFA BYLAW 1301: FORMS AND PROCEDURES FOR ASSESSMENT FEE COMPUTATION
                (Staff, revised November 26, 2001)

                 

                INTERPRETIVE NOTICE

                SCHEDULE I

                National Futures Association
                Box 98383
                Chicago, Illinois 60693-0001

                FCM ASSESSMENT FEE SUMMARY REPORT (PDF version)

                __________________
                NFA ID Number

                ______________________
                FCM Member

                _________________________
                Address

                _________________________________

                City State Zip Code

                _________________
                Month Ended

                __________________________
                Phone

                LINE VOLUME OF
                ASSESSABLE
                TRANSACTIONS
                FEES ($)
                A. Futures Contracts Traded on
                U.S. Exchanges (Round-Turns)
                ________ ________
                B. Futures Contracts Traded on
                Foreign Exchanges for
                U.S. Customers (Round-Turns)
                ________ ________
                C. Options Traded on U.S.
                Exchanges (Number of Trades)
                ________ ________
                D. Options Traded on Foreign
                Exchanges for U.S. Customers
                (Number of Trades)
                ________  ________
                E. Total NFA Assessment Fee - Due Within
                30 Days After the End of the Month
                ________
                F. List FCM Remitting Fees on Your Behalf ________

                If you are not liable for an assessment fee this month, for example, because your firm clears on a fully disclosed basis through another FCM that is remitting fees on your behalf, a Summary Report is still required.

                Please complete this form showing zero volume and fees, sign and return by the due date.

                I certify the above information is true and correct.

                  ________________________
                Authorized Signature

                ________________________
                Name

                Please remit to: National Futures Association
                Box 98383
                Chicago, Illinois 60693-0001
                Attn: Treasurer's Office

                 
                NFA BYLAW 1301: FORMS AND PROCEDURES FOR ASSESSMENT FEE COMPUTATION
                (Staff, revised January 1, 2002; April 1, 2002; July 1, 2002; January 1, 2003; January 1, 2008 and January 1, 2011)

                 

                INTERPRETIVE NOTICE

                SCHEDULE II

                NATIONAL FUTURES ASSOCIATION
                Box 98383
                Chicago, Illinois 60693-0001

                FCM ASSESSMENT FEE WORKSHEET
                MONTH ENDED __ / __ / __

                _________________
                FCM Member

                The information concerning transactions provided on this form will be utilized solely for purposes of computing the applicable NFA Assessment Fee and will be treated as confidential by NFA. This information may be supplied to the CFTC upon its request. However, it is the opinion of NFA that such information my be withheld by the CFTC from public disclosure under applicable provisions of the Freedom of Information Act, 5 U.S.C. § 552.

                  Futures Contracts Traded On U.S. Exchanges Total
                1. Total U.S. futures contracts round-turns _____
                2. Less: Round-turns of customers having "privileges of membership" on exchange where contract is executed (_____)
                3. Less: Round-turns in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM (_____)
                4. Less: Round-turns in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf (_____)
                5. Less: Round-turns carried in an account owned by a business affiliate of an FCM executed on an exchange of which the FCM is a member (_____)
                6. Total assessment fees due on futures contracts traded on U.S. Exchanges (Line 1 less Lines 2-5)

                _____x$.04=
                $_____
                  Futures Contracts Traded On Foreign Exchanges for U.S. Customers  
                7. Total foreign futures contract round-turns _____
                8. Less: Round-turns in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM (_____)
                9. Less: Round-turns in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf (_____)
                10. Assessable volume (Line 7 less Lines 8-9)

                _____x$.04=
                $_____
                  Options Traded On U.S. Exchanges  
                11. Total U.S. exchange-traded option trades _____
                12. Less: Trades of customers having "privileges of membership" on exchange where contract is executed (_____)
                13. Less: Trades in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM (_____)
                14. Less: Trades in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf (_____)
                15. Less: Trades carried in an account owned by a business affiliate of an FCM executed on an exchange of which the FCM is a member (_____)
                16. Total assessment fees due on options contracts traded on U.S. Exchanges (Line 11 less Lines 12-15)

                $_____
                  Options Traded On Foreign Exchanges For U.S. Customers  
                17. Total foreign exchange-traded option trades _____
                18. Less: Trades in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM (_____)
                19. Less: Trades in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf (_____)
                20. Assessable volume (Line 17 less Lines 18-19) _____x$.02=
                $_____
                21. Total NFA assessment fee (Lines 6, 10, 16, and 20) $_____

                Transfer the information on Lines 6, 10, 16, 20, and 21 to the FCM Assessment Fee Summary Report.

                 
                NFA BYLAW 1301: FORMS AND PROCEDURES FOR ASSESSMENT FEE COMPUTATION
                (Staff, revised July 1, 2002; January 1, 2003 and January 1, 2011)

                 

                INTERPRETIVE NOTICE

                NATIONAL FUTURES ASSOCIATION
                FCM ASSESSMENT FEE WORKSHEET INSTRUCTIONS

                The NFA assessment fee is a transaction fee payable on round-turns in commodity futures contracts, trades in exchange-traded options and trades in dealer options. The attached worksheet is intended to assist the FCM Member and NFA in calculating the required payment. The following are instructions for completion of the worksheet.

                Line 1: Total U.S. futures contract round-turns-Provide total round-turn futures transactions (including all mini contracts) closed during the month for all accounts. You must include all transactions on a domestic exchange. You should exclude all transactions placed through another FCM on a fully disclosed basis for which the clearing FCM has collected and remitted the assessment fee to NFA.

                Line 2: Round-turns of customers having "privileges of membership" on exchange where contract is executed-List the number of round-turn transactions for which the account holder was charged a member fee by the domestic exchange.

                Line 3: Round-turns in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM-List the number of round-turn transactions in an omnibus account carried for another FCM Member of NFA for which the other FCM is paying the assessment.

                Line 4: Round-turns in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf-Indicate the number of round-turn transactions in an omnibus account cleared by another FCM which has agreed to remit the NFA Fee. Attach a list of such clearing brokers to the FCM Assessment Fee Summary Report.

                Line 5: Round-turns carried in an account owned by a business affiliate of an FCM executed on an exchange of which the FCM is a member-List the number of round-turn transactions (not included on Line 2) carried for a business affiliate that directly or indirectly owns 100 percent of or is owned 100 percent by or has 100 percent ownership in common with the FCM.

                Line 7: Total foreign futures contract round-turns-Provide total round-turn futures transactions closed during the month for U.S. customers. (A U.S. customer includes any customer who resides in the United States, its territories or possessions.) You should exclude all transactions placed through another FCM on a fully disclosed basis for which the clearing FCM has collected and remitted the assessment fee to NFA.

                Line 8: Round-turns in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM-List the number of round-turn transactions in an omnibus account carried for another FCM Member of NFA for which the other FCM is paying the assessment.

                Line 9: Round-turns in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf-Indicate the number of round-turn transactions in an omnibus account cleared by another FCM which has agreed to remit the NFA Fee. Attach a list of such clearing brokers to the FCM Assessment Fee Summary Report.

                Line 10: Assessable volume-This amount is total foreign futures round-turns less exclusions. The $.04 per round-turn assessment fee is multiplied by this number to arrive at the basic foreign futures contract assessment.

                Line 11: Total U.S. exchange-traded option trades-Provide total trades (purchases or sales, not exercises or expirations) in the month for all accounts. You must include all transactions on a domestic exchange. You should exclude all trades placed through another FCM on a fully disclosed basis for which the clearing FCM has collected and remitted the assessment fee to NFA.

                Line 12: Trades of customers having "privileges of membership" on exchange where contract is executed-List the number of trades for which the account holder was charged a member fee by the domestic exchange.

                Line 13: Trades in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM-List the number of trades in an omnibus account carried for another FCM Member of NFA for which the other FCM is paying the assessment.

                Line 14: Trades in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf-Indicate the number of option trades in an omnibus account cleared by another FCM which has agreed to remit the NFA fee on your behalf. Attach a list of such clearing brokers to the FCM Assessment Fee Summary Report.

                Line 15: Option trades carried in an account owned by a business affiliate of an FCM executed on an exchange of which the FCM is a member-Include all options trades (not included on Line 11) for a business affiliate that directly or indirectly owns 100 percent of or is owned 100 percent by or has 100 percent ownership in common with the FCM.

                Line 17: Total foreign exchange-traded option trades-Provide total trades (purchases or sales, not exercises or expirations) in the month for U.S. customers. (A U.S. customer includes any customer who resides in the United States, its territories or possessions.) You should exclude all trades placed through another FCM on a fully disclosed basis for which the clearing FCM has collected and remitted the assessment fee to NFA.

                Line 18: Trades in an omnibus account carried for another FCM Member for which assessments are payable to NFA by the other FCM-List the number of trades in an omnibus account carried for another FCM Member of NFA for which the other FCM is paying assessment.

                Line 19: Trades in an omnibus account cleared by another FCM Member for which the clearing FCM Member has agreed to pay the NFA assessment fee on your behalf-Indicate the number of option trades in an omnibus account cleared by another FCM which has agreed to remit the NFA fee on your behalf. Attach a list of such clearing brokers to the FCM Assessment Fee Summary Report.

                Line 20: Assessable volume-This amount is total foreign exchange-traded option trades less exclusions. The $.02 per trade assessment fee is multiplied by this figure to arrive at the assessment for foreign exchange-traded options.

                Line 21: Total NFA assessment fee-This is the sum of the futures, exchange-traded option and dealer option Assessment Fees as listed in Lines 6, 10, 16 and 20.


                9018 - REGISTRATION RULE 402: CPOS OF POOLS TRADING PRIMARILY IN SECURITIES

                (Board of Directors, August 1, 1992; revised December 10, 2007)

                INTERPRETIVE NOTICE

                The Board of Directors has granted the Director of Compliance the authority to waive the Series 3 examination for certain individuals who are associated with CPOs who are required to register solely because they operate commodity pools which are principally engaged in securities transactions. The individual or firm requesting the waiver must provide a written description of the facts which qualify the individual for a waiver. The Director of Compliance's decision will be final.

                The Director of Compliance is authorized to waive the Series 3 examination in either of the following situations:

                1. The CPO or the commodity pool is subject to regulation by a federal or state regulator (e.g., the Securities and Exchange Commission, federal bank regulators or state insurance agencies) or the pool is privately offered pursuant to an exemption from the registration requirements of the Securities Act of 1933 and the CPO limits its activities for which registration is required to operating a commodity pool which:

                  a. engages principally in securities transactions;
                  b. commits only a small percentage of its assets as initial margin deposits and premiums for futures and options on futures; and
                  c. uses futures transactions and options on futures only for hedging or risk management purposes.

                2. The individual requesting the waiver is a general partner of a CPO or of a commodity pool which is primarily involved with securities investments; there is at least one registered general partner of the CPO or pool who has taken and passed the Series 3 examination; and the individual requesting the waiver is not involved in soliciting or accepting pool participations, trading futures or options on futures, handling customer funds, supervising any of the above activities or engaging in any other activity that is integral to the operation of the fund as a pool.

                Waiver requests should be directed to:

                Director of Compliance
                National Futures Association
                300 South Riverside Plaza
                Chicago, Illinois 60606


                9019 - COMPLIANCE RULE 2-9: SUPERVISION OF BRANCH OFFICES AND GUARANTEED IBS

                (Board of Directors, October 6, 1992; revised July 24, 2000)

                INTERPRETIVE NOTICE

                NFA Compliance Rule 2-9 places a continuing responsibility on every Member to diligently supervise its employees and agents in all aspects of their futures activities. Rule 2-9 applies not only to the supervision of branch office operations, but also imposes a direct duty on guarantor FCMs to supervise the activities of their guaranteed IBs. NFA Compliance Rule 2-23 provides that a guarantor FCM may be held jointly and severally subject to discipline by NFA for violations of NFA rules committed by the FCM's guaranteed IBs. In practice, NFA's Business Conduct Committee has charged FCMs under Rule 2-23 only where it appears that the guarantor failed to diligently supervise its guaranteed IBs.

                NFA recognizes that, given the differences in the size of and complexity of the operations of NFA Members, there must be some degree of flexibility in determining what constitutes "diligent supervision" for each firm. It is NFA's policy to leave the exact form of supervision to the Member, thereby providing the Member with flexibility to design procedures that are tailored to the Member's own situation. Nevertheless, NFA's Board of Directors believes that it is appropriate to provide Members with specific minimum standards for a supervisory program for branch offices and guaranteed IBs ("remote locations") and therefore issues the following Interpretive Notice.

                Though Members may tailor their supervisory procedures to meet their particular needs, any adequate program for supervision must include procedures for performing day-to-day monitoring and surveillance activities, conducting on-site visits of remote locations and conducting ongoing training for firm personnel. The firm's policies and procedures, including those for the supervision of branch offices and guaranteed IBs, should be in written form. Firm personnel and guaranteed IB personnel should be provided a copy of the appropriate policies and procedures relating to their duties, and be aware of the firm's requirements. A copy of all policies and procedures should be on file with the branch office or guaranteed IB. All supervisory personnel should be knowledgeable of the firm's requirements for supervision.

                I. Day-to-Day Monitoring

                On a regular basis a Member should perform a number of supervisory procedures in order to monitor the business being conducted in its remote locations. The extent of the supervision depends on a number of factors, including the volume of trading, the experience of the personnel, the nature of the customers, the trading strategies followed by the office or certain APs, the number of customer complaints and the length of time that the office has conducted business with the firm. Repeated problems in any particular area should heighten the level of scrutiny and follow-up by the main office or guarantor.

                The procedures to review the day-to-day activities of an office should include the following areas.

                Hiring. An adequate program for supervision must include thorough screening procedures for prospective employees to ensure they are qualified and to determine the extent of supervision the person would require if hired. The appropriate documentation to support any "yes" answers on the Form 8-R should be obtained and reviewed for potential disqualifying information. Derogatory information, which the applicant may have submitted in connection with any past regulations, should be obtained from NFA.1 Prior employers should be contacted to confirm the person's previous work experience.

                In connection with the review of the person's prior work experience, a prospective employer should check for any futures-related disciplinary proceedings against the person's prior employer.2 This information should be used by the prospective employer to determine the extent of supervision a particular applicant would require after he or she is hired.

                Due Diligence Check of Guaranteed IBs. Guarantor FCMs must do a due diligence inquiry before entering into a guarantee agreement. The due diligence review must include a check to ensure that the IB is properly registered. The FCM's due diligence review should also include inquiries concerning the disciplinary history of the IB and the disciplinary and employment history of the IB's principals and APs. This type of information could be helpful to a prospective guarantor in determining the types of difficulties, if any, experienced by an IB, its principals and APs in the past and the extent of supervision which may be required of that IB under a guarantee agreement. For example, if the APs at a certain IB have received their futures training and experience at a firm or firms that have been subject to serious disciplinary actions by NFA or the CFTC, that IB may well require more supervision. Both registration and disciplinary information is readily available from NFA.3

                Registration. Records of commissions payable to or generated by the branch office or guaranteed IB should be broken down by sales person and should be frequently reviewed to ensure that no commissions are being paid to unregistered individuals.

                Customer Information. NFA Compliance Rules require each Member to adopt and enforce procedures regarding customer information and risk disclosure. The procedures for opening new accounts should require that the appropriate account documentation, including an acknowledgment of receipt of the required risk disclosure statement, be forwarded to the main office or guarantor.4 The documentation should be reviewed to ensure that the appropriate supervisory personnel approved the account. The information obtained from a customer should be reviewed to determine whether additional risk disclosure should have been provided to the customer. For any customer who should have received additional risk disclosure, the main office or guarantor should ensure that additional disclosure has been given and that such disclosure has been documented. It may also be necessary to contact the customer to verify that the disclosure was provided and that the customer understood its meaning. Notwithstanding these procedures, a firm may wish to require that all new account information and documentation be forwarded to the main office or guarantor for approval before trading commences in the account.

                Account Activity. The trading activity in customer and AP personal accounts should be reviewed and analyzed on a regular basis in order to highlight those accounts which may require further scrutiny. There are a number of calculations and comparisons which can be performed to flag accounts for follow-up or further monitoring. For example, significant losses, commission charges or number of trades should be reviewed for inappropriate trading strategies. The reason for error and correction entries to trading accounts should be investigated, especially if there appears to be a pattern of errors or corrections made by an office. Commission-to-equity ratios should be calculated for discretionary accounts to detect possible excessive trading. In order to identify improper trade allocations for discretionary accounts or front running, the trading results in an AP's personal account should be compared to the trading gains and losses in his or her customer accounts. Profitable customer accounts for a given AP should be reviewed for possible preferential treatment.

                Appropriate supervisory personnel at the remote location should be notified of questionable account activity. Measures should be taken to follow up, such as reviewing order tickets and trade blotters, discussing the activity with the broker or contacting the customer.

                Discretionary Accounts. NFA Compliance Rule 2-8 contains detailed requirements concerning the supervision and review of discretionary accounts. The written customer authorization and customer acknowledgment for third-party account controllers should be forwarded to the main office or guarantor. 5 Confirmation of the registration history of APs of FCMs and IBs exercising discretion should be made to ensure that they have been properly registered for the requisite two-year minimum.

                Promotional Material. NFA Members are required by rule to adopt and enforce procedures regarding communications with the public. All promotional material should be submitted by the branch office or guaranteed IB to the home office or guarantor for review and approval prior to its first use. Review and approval of the material should be documented by the appropriate supervisory personnel.

                Customer Complaints. An adequate system for handling customer complaints should require that a written record of all complaints be maintained, and that complaints which meet certain criteria be sent to the main office or guarantor. Notification of the main office of customer complaints may be based on factors including the seriousness of the allegations of wrong-doing, the monetary amount involved, and which APs or principals are subjects of the complaints. If the remote location is responsible for resolving customer complaints, the home office or guarantor should also be notified of the outcome of resolved complaints. Notwithstanding these criteria, a firm may wish to consider having all customer complaints received by a remote location submitted to the main office.

                The main office or guarantor should review the complaints for possible rule violations. It should also compare the allegations in the complaint for similarity to other complaints received against the same individuals or office. Such a review may detect a pattern of sales practice or other abuses.

                The status of unresolved complaints should be periodically reviewed to ensure that the branch office or guaranteed IB has promptly responded to complainants.

                II. On-Site Visits

                In addition to day-to-day supervisory procedures, adequate supervision of the personnel who do work in the main office must also include periodic on-site inspections. As a general matter, NFA would expect these on-site inspections of guaranteed IBs or branch offices to be performed annually.

                Members should develop written procedures for the on-site review process including detailed steps to be followed during the visit. This will help ensure that the review process is performed in a consistent manner and will not vary due to the involvement of different personnel in the review process. A Member's supervisory procedures should also address the number of visits to be made to a branch office or guaranteed IB. The frequency and nature of the visits, as well as whether the visit will be announced or unannounced, will depend on a number of factors including: the amount of business generated; the number of customer complaints received; the previous training and experience of the branch office personnel; and the frequency and nature of problems or concerns that arise as the result of day-to-day monitoring and surveillance of the office's activities. The personnel who make the visits should be qualified to perform examinations and knowledgeable of the industry and the nature of the firm's business. Such personnel should be able to perform their work with an independent, objective perspective.

                The length of time between visits to the remote location coupled with the size and scope of its operation also plays a role in determining the procedures for on-site review of records and account documentation.6 In reviewing a smaller operation, it is feasible to conduct a comprehensive review of the remote location's records and documents over the entire time period between visits, while reviewing a larger scale operation may require the selection of a sample of records and documents for given time intervals. The selection of samples should be accomplished on a random basis, for example, selecting every third account for review for randomly selected time periods.

                Promptly after the completion of an on-site visit, a written report should be prepared and its findings discussed with the branch office and regional managers or guaranteed IB's principals and supervisory personnel. Follow-up procedures should also be performed to ensure that any deficiencies revealed during an on-site visit are promptly corrected. The written procedures for the on-site examination should include steps to review the following areas:

                Customer Order Procedures. An on-site visit to a remote location should include a review of procedures for handling and recording customer orders. The individuals responsible for accepting customer orders should be identified and a sample of order tickets should be selected for review. NFA recommends that order tickets be prenumbered and that the on-site review test to ensure that all order tickets within the chosen samples are accounted for. The order ticket review should also confirm that all order tickets are properly time stamped and that all information required by CFTC Regulation 1.35 is included. If option orders are placed by the branch office or guaranteed IB, those order tickets should be reviewed to ensure that they contain the additional information required by CFTC Regulation 1.35.

                Discretionary Accounts. If a branch office or guaranteed IB handles discretionary accounts, the supervisory visit should confirm that the branch office or guaranteed IB identifies discretionary orders as such and that the firm's procedures regarding the supervision of discretionary trading activity are followed. In the event a branch office or guaranteed IB enters block orders, those orders should be reviewed to confirm that customer orders are not included with proprietary orders and that nondiscretionary customer orders are not included with discretionary customer orders. Split fills should be reviewed to ensure that they have been allocated according to established procedures.

                Sales Practices. The on-site visit should include a review of sales solicitation practices as well as any promotional material utilized. A suggested starting point for review of the sales solicitation practices of a branch office or guaranteed IB is to identify the persons involved in sales solicitation and to confirm that they are properly registered. The individuals conducting the on-site review should also monitor sales solicitations while at the branch office or guaranteed IB. Interviews with selected customers should be conducted concerning the solicitation process and the handling of the customer's account. The individuals at the branch office or guaranteed IB responsible for supervising sales solicitations should be identified, and the method by which sales solicitations are supervised should be reviewed for adequacy.

                The branch office or guaranteed IB's promotional material, including sales solicitation scripts, must be approved by appropriate supervisory personnel. Therefore, an on-site visit should be designed to ensure that the branch or guaranteed IB is not using any promotional material that has not received prior approval. If the main office or guarantor has not approved the promotional material, it should be reviewed during the on-site visit.

                Customer Complaints. The on-site review should include steps to confirm that all complaints requiring notification have been reported to the main office.

                Handling of Customer Funds. In order to assure that customer funds are being properly handled by a branch office, the on-site review should determine whether the branch office accepts funds from customers and, if so, whether appropriate bank accounts, including segregated accounts for customer funds, have been established by authorized personnel. In addition, for guaranteed IBs, the on-site review should confirm that if funds are accepted from customers, they are received in the name of the FCM. The branch office or guaranteed IB should make copies of any customer checks that they deposit into a qualifying or branch bank account. The check copies should be reviewed during the visit to ensure that the branch office or guaranteed IB only accepts checks made payable to the FCM. In addition, third-party checks should be scrutinized to ensure that no customers are acting as unregistered FCMs or CPOs. If the guaranteed IB receives customer funds in the FCM's name, the review should confirm that the proper authorization to do so exists, that appropriate bank accounts are maintained and that proper procedures for forwarding the funds have been established and are followed. For both branch offices and guaranteed IBs, the flow of customer funds in a sample of accounts should be reviewed to determine that all funds have been timely transmitted and properly credited.

                Proprietary Trading. To the extent feasible, there should be a separation of duties between persons handling customer orders and firm employees or principals trading for the firm's proprietary accounts or their own accounts to prevent misuse of non-public information or the occurrence of other trading abuses.

                III. Ongoing Training

                A Member's supervisory responsibilities include the obligation to ensure that its employees are properly trained to perform their duties. Procedures must be in place to ensure that employees receive adequate training to abide by industry rules and regulations and to properly handle customer accounts and that APs have completed the ethics training required by CFTC Regulation 3.34. Employees must be educated on developments and changes in the markets, futures products, rules and regulations, technology, and firm policies and procedures. The formality of a training program will depend on the size of the firm and the nature of its business. The individuals responsible for providing the training must be qualified to do so.

                Certain APs may require training for soliciting and handling customer accounts. If an AP has previously worked at firms closed through an enforcement action for sales fraud and has therefore received his or her training from such firms, that AP may need specialized training in proper sales practices.

                This Notice is intended to specify minimum supervisory standards for branch offices and guaranteed IBs. A failure to adhere to the requirements specified in this Notice will be deemed a violation of NFA Compliance Rule 2-9.


                1 The detailed explanation of any "yes" answers on an 8-R is treated as nonpublic information; however, it is available to prospective employers under NFA Registration Rule 701(c). See Interpretive Notice at ¶9010.

                2 Information concerning futures-related disciplinary proceedings can be obtained by checking the BASIC system on NFA's web site at www.nfa.futures.org, sending a request to NFA through the "contact" feature of the web site, or calling NFA's Information Center at (800) 621-3570. See Interpretive Notice at ¶9010.

                3Registration Information is also available by checking the BASIC system on NFA's web site at www.nfa.futures.org, sending a request to NFA through the "contact" feature of the web site, or calling NFA's Information Center at (800) 621-3570. See Interpretive Notice at ¶9007.

                4 NFA Rules require that a guaranteed IB maintain a record of the information obtained from a customer and a copy of the risk disclosure acknowledgment. A branch office may wish to keep copies of this information for its files.

                5 NFA Rules require that a guaranteed IB maintain a record of the written customer authorization and customer acknowledgments for third-party account controllers. A branch office may wish to keep copies of this information for its files.

                6 If a visit is prompted by awareness of a particular problem at a remote location or if a problem is discovered during a routine visit, the Member must ensure that the scope of the review is adequate to thoroughly examine the problem area.


                9020 - COMPLIANCE RULES 2-9, 2-36 AND 2-39: SELF-AUDIT QUESTIONNAIRES

                (Board of Directors, October 6, 1992; revised July 24, 2000 and April 8, 2011)

                INTERPRETIVE NOTICE

                NFA Compliance Rule 2-9 places a continuing responsibility on every Member to diligently supervise its employees and agents in all aspects of their futures activities, while Compliance Rule 2-36 (and Compliance Rule 2-39 by reference to Compliance Rule 2-36) imposes the same requirements on Members with respect to their forex related activities. NFA recognizes that, given the differences in the size and complexity of the operations of NFA Members, there must be some degree of flexibility in determining what constitutes "diligent supervision" for each firm. It is NFA's policy to leave the exact form of supervision to the Member, thereby providing the Member with flexibility to design procedures that are tailored to the Member's own situation. The Board of Directors adheres to this principle but feels that all Members should regularly review the adequacy of their supervisory procedures.

                The Board of Directors has determined that in order to satisfy their continuing supervisory responsibilities, NFA Members must review on a yearly basis self-audit questionnaires that can be downloaded from NFA's web site at www.nfa.futures.org. All Members must review the general questionnaire and one or more of the applicable supplemental questionnaires (e.g., FCM, FDM, IB, CPO or CTA). The questionnaires must be reviewed by the appropriate supervisory personnel in the home and branch office, if applicable. After reviewing the questionnaire, an appropriate supervisory person must sign the questionnaire stating that the Member's operations have been evaluated based on the questionnaire and attesting that the Member's procedures comply with all applicable NFA requirements.

                Members are required to retain the signed questionnaire in their files for a period of five years from the date of review, with the questionnaires being readily accessible during the first two years. In addition, guaranteed IBs must provide and FCMs and FDMs that guarantee any IBs must obtain copies of the signed questionnaires. Members must also provide the signed questionnaires for inspection upon request by NFA.

                Review of the questionnaires should aid Members in recognizing potential problem areas and alert them to procedures which need to be revised or strengthened. The questionnaires focus on a Member's regulatory responsibilities and require a review of the adequacy of the Member's internal procedures. For example, the FCM questionnaire requires review of a Member's procedures relating to customer order flow, customer account documentation, risk disclosure, margin policies, option accounts and transactions, customer complaints, advertising, and compliance with other NFA requirements. Similarly, the CPO/CTA questionnaires contain questions that will assist CPOs and CTAs in their review of disclosure documents.

                A Member firm that does not comply with this Interpretive Notice will violate NFA Compliance Rule 2-9, 2-36, or 2-39, as applicable.

                Questions regarding this Interpretation or the questionnaires should be directed to the Compliance Department at (800) 621-3570 or through the "contact" feature of NFA's web site.


                9021 - COMPLIANCE RULE 2-9: ENHANCED SUPERVISORY REQUIREMENTS

                (Board of Directors, January 19, 1993; revised August 14, 1996, December 16, 1996; March 10, 1998; July 1, 2000; January 1, 2001; June 1, 2001; August 21, 2001; March 18, 2003; November 9, 2004; February 15, 2006; April 15, 2006; November 1, 2007; December 17, 2007; September 18, 2008; January 3, 2011; October 1, 2014; June 13, 2016; and September 19, 2016.)

                INTERPRETIVE NOTICE

                I. INTRODUCTION

                Over the years, NFA's Board of Directors has adopted strict and effective rules to prohibit deceptive sales practices, and those rules have been vigorously enforced by NFA's Business Conduct Committee. The Board notes, however, that by their very nature, enforcement actions occur after the customer abuse has taken place. The Board recognizes that NFA's goal must be not only to punish such deception of customers through enforcement actions but to prevent it, or minimize its likelihood, through fair and effective regulation.

                One NFA rule designed to prevent abusive sales practices is NFA Compliance Rule 2-9. Subsection (a) of this rule places a continuing responsibility on every Member to diligently supervise its employees and agents in all aspects of their futures activities, including sales practices. Although NFA has not attempted to prescribe a set of supervisory requirements to be followed by all NFA Members, NFA's Board of Directors believes that Member firms which are identified as having a sales force and/or principals that have been affected by questionable sales practice training and firms which charge commissions and fees well above the industry norm should be required to adopt enhanced supervisory requirements designed to prevent sales practice abuse. Subsection (b) authorizes the Board of Directors to require Members, which meet certain criteria established by the Board, to adopt specific supervisory procedures designed to prevent abusive sales practices. Subsection (b) covers all activities regulated by NFA, including the off-exchange retail forex activities of Members subject to NFA Compliance Rule 2-36.

                The Board believes that in order for the criteria used to identify firms subject to the enhanced supervisory requirements to be useful, those criteria must be specific, objective and readily measurable. The Board also believes that any supervisory requirements imposed on a Member must be designed to quickly identify potential problem areas so that the Member will be able to take corrective action before any customer abuse occurs. The purpose of this Interpretive Notice is to set forth the criteria established by the Board which obligate a Member to adopt the enhanced supervisory requirements and to specify the enhanced supervisory requirements which are required of firms meeting these criteria.

                In developing the criteria, the Board concluded that it would be helpful to review Member firms which had been disciplined through enforcement actions taken by the CFTC or NFA for deceptive sales practices. The Board's purpose was to identify factors common to these Member firms and probative of their sales practice problems, which could be used to identify other Member firms with potential sales practice problems.

                One factor identified by the Board as common to these firms and directly related to their sales practice problems is the employment history and training of their sales forces and firm principals. For many of these Members, a significant portion of these individuals were previously employed and trained by one or more Member firms which had been disciplined for fraud. The Board believes that the employment history of a Member's APs and principals is a relevant factor to consider in identifying firms with potential sales practice problems. If a Member firm is disciplined by NFA or the CFTC for fraud related to widespread telemarketing or promotional material problems or by the Financial Industry Regulatory Authority or the SEC for fraud related to its sales practices regarding security futures products as defined in Section 1a(45) of the Commodity Exchange Act ("Act"), it is reasonable to conclude that the training and supervision of its sales force was wholly inadequate or inappropriate. It is also reasonable to conclude that an AP or principal who received inadequate or inappropriate training and supervision may have learned improper sales tactics, which he will carry with him to his next job. Therefore, the Board believes that a Member firm employing such a sales force must have stringent supervisory procedures in place in order to ensure that the improper training its APs and principals have previously received does not taint their sales efforts on behalf of the Member.

                The Board notes further that there have been instances in which Members and Associates have subverted the Board's purpose in imposing the enhanced supervisory requirements by closing a firm once it qualifies for those requirements and opening another firm or firms that have a mix of employees that does not meet the criteria for adopting the requirements. The new firms typically have individuals who have worked for firms that have been disciplined for fraud related to telemarketing or promotional material and who worked at the original qualifying firm, but they are redistributed so as to keep the employee mix below the threshold for becoming subject to the enhanced supervisory requirements. The Board has determined to apply the enhanced supervisory requirements to firms that use this strategy.

                The Board also notes that Members that assess commissions, fees and other charges that total well above the industry norm comprise a disproportionately high share of firms that have been subject to disciplinary action for sales practice abuses. Some of the abuses that have been cited relate to the creation of a misleading impression of the likelihood of achieving profits by investing with a Member through misstatements or material omissions concerning the impact of commissions and fees.

                The Board believes that when a Member charges its customers commissions, fees and other charges that total well above the industry norm it is incumbent on that Member to exercise a very high degree of supervision of solicitations made by its APs so as to ensure that customers are given accurate information regarding the impact of those expenses on the likelihood of achieving profit. Consistent with its approach in other situations involving an increased likelihood of misleading solicitations, the Board believes that the enhanced supervisory requirements provide a practical opportunity for a Member that charges commissions, mark-ups, fees and other charges that are well above the industry norm to monitor solicitations and correct problems with those solicitations in an expeditious manner.

                II. OBLIGATIONS OF MEMBERS SUBJECT TO THE ENHANCED SUPERVISORY REQUIREMENTS

                A. Recording of all conversations with existing and potential customers

                Those Member firms meeting the criteria requiring them to adopt the enhanced supervisory requirements will be required to make complete audio recordings of all telephone conversations that occur between their APs and both existing and potential customers, including existing and potential retail forex customers of Members subject to NFA Compliance Rule 2-36. The Board believes that recording these conversations provides these Members with the best opportunity to monitor closely the activities of their APs and also provides these Members with complete and immediate feedback on each AP's method of soliciting customers. Members that are required to record their conversations must retain such recordings for a period of five years from the date each recording is created and the recordings shall be readily accessible during the first two years of the five-year period. In retaining the recorded conversations, Member firms must catalog the recordings by AP and date. Additionally, any Member firm meeting the criteria must require all its APs to maintain a daily log for sales solicitations which reflects at a minimum the identity of each customer or prospective customer the AP spoke with on each day. A Member firm must be able to promptly produce, upon request from NFA or the CFTC, all conversations relating to a specific AP, and only that AP, for a given date. Members that are required to record under this Interpretive Notice are further required to promptly provide NFA or the CFTC with appropriate resources for listening to their recordings upon request.

                B. Enhanced capital requirement

                Any Member introducing broker ("IB") meeting the criteria is required to either operate pursuant to a guarantee agreement or maintain adjusted net capital of at least $250,000 during the entire period for which the Member is required to adopt the enhanced supervisory requirements. Eligible guarantor futures commission merchants ("FCM"s) are those that meet the eligibility requirements for executing a Supplemental Guarantor Certification Statement pursuant to NFA Registration Rule 509(b)(5). Any IB Member opting to maintain the higher level of adjusted net capital shall also be subject to the financial record-keeping and reporting requirements applicable to FCMs.

                Any Member commodity trading advisor ("CTA") or commodity pool operator ("CPO") meeting the criteria is required to maintain adjusted net capital of at least $100,000 during the entire period for which the Member is required to adopt the enhanced supervisory requirements. Member CTAs and CPOs meeting the criteria are required to demonstrate compliance with this adjusted net capital requirement to NFA upon request.

                Any Forex Dealer Member ("FDM") or FCM meeting the criteria is required to maintain adjusted net capital of at least the early warning requirement under CFTC rules.

                C. Filing promotional material with NFA

                Those Member firms meeting the criteria will be required to file all promotional material, as defined in NFA Compliance Rule 2-29(i), with NFA at least 10 days prior to its first use.

                D. Written supervisory procedures

                Those Members meeting the criteria shall have written supervisory procedures that include the titles, registration status and locations of the firm's supervisory personnel as these relate to the firm's commodity futures business, retail forex business, and applicable securities laws and regulations for the trading of security futures products. The written procedures must include at a minimum:

                • a description of the steps taken to supervise and monitor calls which identify how often monitoring of recordings will take place; who will conduct the monitoring; and how the results of monitoring will be documented;

                • specific information identifying the recording equipment being used;

                • a description of the method for cataloging and maintaining recordings; and

                • a description and sample format of the daily logs prepared by APs that includes, at a minimum, the identity of each customer or prospective customer the AP spoke with on each day.

                Member firms shall also maintain on an internal record the names of all persons who are designated as supervisory personnel and the dates for which the designation is or was effective. Additionally, a Member meeting the criteria shall file with NFA's Compliance Department a report relating to the Member firm's compliance with the supervisory requirements contained herein within 15 days after the end of each calendar quarter. Member firms shall retain the internal record and report(s) for a period of five years, the first two years in an easily accessible place.

                III. QUALIFICATION FOR THE ENHANCED SUPERVISORY REQUIREMENTS

                A. Definitions, treatment of individuals and firms and exemptions

                1. Definition of Disciplined Firm

                A current list of the firms which meet the definition of a Disciplined Firm is maintained on NFA's Web site at https://www.nfa.futures.org/ereg. For purposes of this Interpretive Notice, a Disciplined Firm is defined very narrowly to include those firms that fall into one of the following two groups:

                  a. Firms that have been disciplined by NFA or the CFTC

                  Members that qualify as Disciplined Firms based on their disciplinary histories with the CFTC or NFA include those firms for which:

                    1. the firm has been formally charged by either the CFTC or NFA with deceptive telemarketing practices or promotional material;

                    2. those charges have been resolved; and

                    3. the firm has either been permanently barred from the industry at any time as a result of those charges or has been sanctioned in any way within the preceding five years as a result of those charges.

                  b. Firms that have been disciplined in connection with sales practices involving security futures products

                Members that qualify as Disciplined Firms based on their disciplinary histories related to sales practices involving security futures products include any broker-dealer that, in connection with sales practices involving the offer, purchase, or sale of any security futures product as defined in Section 1a (45) of the Act has at any time been expelled from membership or participation in any securities industry self-regulatory organization ("Securities SRO") or is subject to an order of the SEC revoking its registration as a broker-dealer or has been sanctioned in any way within the preceding five years in connection with sales practices involving the offer, purchase, or sale of any security futures product as defined in Section 1a (45) of the Act.

                2. Treatment of principals who previously worked at a Disciplined Firm

                For purposes of determining whether a Member will be required to adopt the enhanced supervisory requirements based on the employment histories of its APs and principals, principals of a firm, who are not also APs of that firm and who have been previously employed as an AP by one or more Disciplined Firms, shall be counted as if they were APs of the firm.

                3. Treatment of FCMs that guarantee introducing brokers

                For purposes of determining whether an FCM Member will be required to adopt the enhanced supervisory requirements, an FCM and its guaranteed introducing brokers ("GIBs") will be considered a single firm. Therefore, for FCMs with GIBs, the APs of its GIBs will be treated as APs of the FCM for determining whether the FCM meets the requirements. If the FCM Member firm meets the requirements, then the FCM and all its GIBs shall be required to adopt the supervisory procedures specified herein. Of course, individual FCMs or GIBs will be required to adopt the enhanced supervisory requirements provided the FCM or GIB meets the requirements on its own.

                4. Exemptions from being counted as an AP who worked at a Disciplined Firm

                The Board recognizes that there are identifiable populations of APs who are included in the general population of APs who have worked at Disciplined Firms in the past who, further analysis suggests, do not raise the same concerns regarding their previous supervision and training that are raised by the majority of APs who have worked at Disciplined Firms. Generally, these APs worked at Disciplined Firms fairly long ago and are free of additional factors of concern in their employment histories.

                A number of the APs in this group worked at Disciplined Firms for only a short period of time many years ago and have not worked at a Disciplined Firm since or been personally subject to disciplinary action. Others worked at a single Disciplined Firm for a somewhat lengthier period and have subsequently been employed for a substantial length of time by Members that have not shown a propensity for customer abuse and the AP has not been personally subject to disciplinary action.

                The Board has determined that APs who have not been personally subject to a disciplinary action by NFA or the CFTC and who meet the following criteria shall not be counted by a Member that hires them as having been employed by a Disciplined Firm for purposes of calculating whether the composition of the Member's sales force triggers the enhanced supervisory requirements:

                  a. they have been previously employed by Disciplined Firms for a cumulative total of less than 60 days and have not been employed by any Disciplined Firm during the 5 years preceding the determination of whether a Member firm is required to employ the enhanced supervisory requirements established in this Interpretive Notice. In addition, the AP may not have been employed by a Member that has been subject to any sales practice action by NFA or the CFTC, or by any Securities SRO or the SEC in connection with sales practices involving the offer, purchase or sale of any security futures product as defined in Section 1a (45) of the Act since leaving the last Disciplined Firm by which they were employed; or

                  b. they worked at only one Disciplined Firm more than 10 years preceding the determination of whether a Member firm is required to employ the enhanced supervisory requirements and they have not been employed by a Member that has been subject to any sales practice action by NFA or the CFTC, or by any Securities SRO or the SEC in connection with sales practices involving the offer, purchase or sale of any security futures product as defined in Section 1a (45) of the Act within the 10 years preceding the determination, and they have been an NFA Member or Associate Member for at least eight of the ten years preceding the determination.

                B. Criteria that obligate a Member to adopt the enhanced supervisory requirements

                Member firms will be required to adopt the enhanced supervisory requirements if they fall into any of the categories described below.

                1. Obligation based on employment histories of APs and principals

                Firms that meet any of the following numerical criteria are required to adopt the enhanced supervisory requirements:

                • For firms with less than five APs, 2 or more of its APs have been employed by one or more current Disciplined Firms;

                • For firms with at least 5 but less than 10 APs, 40 percent or more of its APs have been employed by one or more current Disciplined Firms;

                • For firms with at least 10 but less than 20 APs, four or more of its APs have been employed by one or more current Disciplined Firms; or

                • For firms with at least 20 APs, 20 percent or more of its APs have been employed by one or more current Disciplined Firms.1

                2. Obligation based on affiliations of principals

                Once a Member firm meets the criteria to adopt the enhanced supervisory requirements, any other Members of which the principals of that Member firm are, or become, principals must also adopt the enhanced supervisory requirements or seek a waiver therefrom subject to the following exception.

                As is the case with some APs, the Board recognizes that there is a limited group of individuals who have been principals of firms that have qualified for the enhanced supervisory requirements who are otherwise free of additional factors that raise concern about their ability to effectively supervise their firms. Therefore, a Member will not qualify for the enhanced supervisory requirements under this section if the principal whose history would cause the qualification meets the following criteria:

                • the principal has not been personally subject to a disciplinary action by NFA or the CFTC;

                • the principal has never been a principal or an AP of a current Disciplined Firm;

                • the most recent firm in the principal's history that qualified for the enhanced supervisory requirements either received a full waiver from abiding by those requirements or abided by those requirements for at least two years and is no longer subject to the enhanced supervisory requirements; and

                • no firm in the prinicipal's history that qualified for the enhanced supervisory requirements has become subject to a sales practice or promotional material based disciplinary action by NFA or the CFTC since qualifying for the enhanced supervisory requirements.

                 3. Obligation based on assessing commissions, fees and other charges well above the industry norm

                Any Member firm that charges 50% or more of its active customers round-turn commissions, fees and other charges that total $100 or more per futures, forex or option contract is required to adopt the enhanced supervisory requirements. Any Member that charges 50% or more of its active customers round-turn commissions, fees and other charges in the amount specified above must promptly inform NFA of that fact. In addition, upon request by NFA, Members shall have the burden of demonstrating to NFA that they charge more than 50% of their active customers round-turn commissions, fees and other charges that are less than the specified amounts. The term "active customers" as used in this section means any customers who are entitled to a monthly statement under the provisions of CFTC Regulations Section 1.33(a). For purposes of this section, any Member whose customer initiates an options contract that would result in total commissions, fees and other charges of $100 or more if the trade was liquidated will be deemed to have charged total commissions, fees and other charges of $100 even if the contract is not ultimately liquidated.

                4. Obligation based on the initiation of disciplinary action

                  a. Members that have fulfilled the enhanced supervisory requirements that become subject to subsequent disciplinary action

                Any Member that has previously been required to adopt the enhanced supervisory requirements; has, in fact, fulfilled that requirement either by adopting the enhanced supervisory requirements for a prescribed period or by receiving a full or partial waiver from the enhanced supervisory requirements from the Telemarketing Procedures Waiver Committee; and subsequently becomes subject to a CFTC or NFA enforcement or disciplinary proceeding alleging deceptive sales practices, shall, within 30 days of being served with notice of the action, adopt all of the enhanced supervisory requirements and may not seek a waiver therefrom. This obligation shall continue until after the disciplinary or enforcement proceeding is closed and all appeals are completed or the time for appeal has passed without an appeal being filed or perfected.

                  b. Members already subject to the enhanced supervisory requirements

                If an NFA Business Conduct Committee disciplinary proceeding or CFTC enforcement proceeding has been filed against a Member firm required to adopt the enhanced supervisory requirements, then the enhanced supervisory requirements will remain in effect for the applicable time period specified or until after the disciplinary or enforcement proceeding is closed and all appeals are completed or the time for appeal has passed without an appeal being filed or perfected, whichever occurs latest.

                IV. WAIVER PROCEDURE

                Any Member required to adopt the enhanced supervisory requirements may seek a waiver by filing a petition with the Telemarketing Procedures Waiver Committee within 30 days of the date of being notified by NFA that it is required to adopt the enhanced supervisory requirements. NFA may grant such a waiver upon a satisfactory showing that the Member's current supervisory procedures provide effective supervision over its employees, including enabling the Member to identify potential problem areas before customer abuse occurs. Additionally, if a Member meets the criteria and trades security futures products, then the Member firm must also make a satisfactory showing that the Member's supervisory procedures ensure compliance with all applicable securities laws and regulations. Should a Member fail to file a petition seeking a waiver within 30 days or should it file a petition that is denied by the Telemarketing Procedures Waiver Committee, either in whole or in part, the Member may not petition for a full or partial waiver again until at least two years have elapsed since the Member adopted the required enhanced procedures. Members that meet the criteria to adopt the enhanced supervisory requirements and receive either a full or partial waiver of their obligation to adopt those requirements are, nevertheless, deemed to be a Member that qualified for the requirements for the purposes of this Interpretive Notice.

                Some of the factors that the three-member Waiver Committee may consider in evaluating a waiver request include:

                • the total number and the backgrounds of APs sponsored by the Member;

                • number of branch offices and GIBs operated by the Member;

                • the experience and background of the Member's supervisory personnel;

                • the number of the Member's APs who had received training from firms which have been closed for fraud, the length of time those APs worked for those firms and the amount of time which has elapsed since those APs worked for the disciplined firms;

                • the results of any previous NFA examinations;

                • the cost effectiveness of the taping requirement in light of the firm's net worth, operating income and related telemarketing expenses;

                • whether the Member assesses commissions, fees and other charges that are based on all of the relevant circumstances, including the expense of executing orders and the value of services the Member renders based on its experience and knowledge; and

                • whether the Member adequately discloses the amount of commissions, fees and other charges before transactions occur in light of a retail customer's trading experience and the impact that the commissions, fees and other charges may have on the likelihood of profit.

                Conditions that the Telemarketing Procedures Waiver Committee shall impose on any Member to which it grants a full or partial waiver include requirements that the firm: notify NFA of any action charging the firm with a violation of CFTC, SEC or Self Regulatory Organization ("SRO") regulations or rules; notify NFA of any customer complaint involving sales practices or promotional material; not change ownership; not have any material deficiencies noted during any SRO examination; not hire additional APs from Disciplined Firms; execute a written acknowledgement that the firm understands the conditions of the waiver; and may include any other conditions deemed by the Committee to be appropriate in consideration of a total or partial waiver from the enhanced supervisory requirements. Violation of any of those conditions may serve as cause for the Telemarketing Procedures Waiver Committee to review and amend or revoke the waiver.

                A Member firm that does not comply with this Interpretive Notice will violate NFA Compliance Rule 2-9(b) and will be subject to disciplinary action.


                1 The Board notes that NFA Registration Rule 214(a) requires sponsors to file a Form 8-T with NFA reporting the termination of an AP within 30 days of their termination. Members should be aware that, notwithstanding that Rule, a Member's obligation to adopt the enhanced supervisory requirements is conclusively established on any day on which its sales force meets one of the listed numerical criteria and that the obligation shall not be extinguished by the effect of the subsequent filing of a Form 8-T for a terminated AP even if the form is filed within 30 days of an AP's termination.


                  9022 - REGISTRATION RULE 402: CTAS TRADING PRIMARILY IN SECURITIES

                  (Board of Directors, September 21, 1993; revised December 10, 2007 and July 9, 2013.)

                  INTERPRETIVE NOTICE

                  The Board of Directors has granted the Vice-President of Registration and Membership the authority to waive the Series 3 examination for certain individuals associated with CTAs who are required to register solely because their securities advisory services include advice on the use of futures and options for risk management purposes. The individual or firm requesting the waiver must provide a written description of the facts which qualify the individual or firm for a waiver. The Vice-President of Registration and Membership's decision will be final.

                  The Vice-President of Registration and Membership is authorized to waive the Series 3 examination for a CTA and its APs if: (1) the CTA is subject to regulation by a federal or state regulator; (2) for each customer for whom the CTA provides futures trading advice such advice is incidental to the securities advisory services provided by the CTA to such customer; and (3) the futures trading advice offered by the CTA is for hedging or risk management purposes.

                  Waiver requests should be directed to:

                  Vice-President of Registration and Membership 
                  National Futures Association
                  300 South Riverside Plaza
                  Chicago, Illinois 60606


                  9023 - COMPLIANCE RULE 2-13: BREAK-EVEN ANALYSIS

                  (Board of Directors, August 24, 1995; revised July 24, 2000)

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-13 requires, in pertinent part, that each Member CPO which delivers a disclosure document under the CFTC Regulation 4.21 must include in the disclosure document a break-even analysis which includes a tabular presentation of fees and expenses. The break-even analysis must be presented in the manner prescribed by NFA's Board of Directors. The purpose of this requirement is to ensure not only that customers will be clearly informed as to the nature and amount of fees and expenses that will be incurred, but that customers will also be made aware of the impact of those fees and expenses on the potential profitability of their investments. NFA's Board of Directors has adopted the following guidelines which must be adhered to by NFA Member CPOs when preparing the break-even analysis required by Compliance Rule 2-13:

                  • If fees are likely to be affected by the size of the offering, then an assumed amount of total funds raised should be stated. The document should also state what the break-even point would be if the minimum or maximum proceeds were raised.

                  • If there are redemption fees, they must be clearly shown and considered part of the total cost and reflected in the break-even analysis.

                  • Incentive fees should be stated as a percentage of profits, and the method by which profits are calculated should be described.

                  • All management, brokerage and other fees should reflect actual experience or contractual charges, if known. If not known, they should be based on good faith estimates. If, for example, CTAs publish their estimated number of round turns/ $1,000,000 then those published estimates should be used for estimating brokerage costs. If this is an on-going fund or if there is evidence supporting other numbers, then the other numbers should be used and explained.

                  • If pool participants are to receive some or all of the interest income generated by the pool, the expected interest income should be deducted from the expenses which must be covered by trading profits to return the customer to the level of his initial investment. The estimate of that interest income must include the assumed interest rate, and that rate must reflect current cash market information. If any interest income is to be paid to the pool operator, or to anyone other than the pool participants, that fact and an estimate of the amount must also be clearly disclosed.

                  To calculate the break-even point a CPO must first determine the amounts of all fees and expenses, exclusive of incentive fees, that are anticipated to be incurred by the pool during the first year of the investment. The total of these fees and expenses less the amount of interest income expected to be earned by the pool represents the gross trading profits before incentive fees (preliminary gross trading profits) that would be necessary for the pool to retain its initial Net Asset Value per unit at the end of the first year. In some situations the CPO must then calculate the additional trading profit that would be necessary to overcome the incentive fees that would be incurred. This situation will arise whenever the pool expects to incur expenses which would not be deducted from the CTA's net performance in calculating the CTA's incentive fee. That amount can be computed by first determining the incentive fees that would be incurred if the preliminary gross trading profits described above were achieved and then dividing that amount by (1- incentive fee rate); (e.g., if the incentive fee is 25 percent, the denominator would be 1- .25, or .75). A sample break-even presentation is shown below:

                  Selling Price per Unit (1) $1,000.00
                  Syndication and Selling Expense (1) $50.00
                  General Partner's Management Fee (2) 9.50
                  Fund Operating Expenses (3) 20.50
                  Trading Advisor's and Trading
                  Manager's Management Fees (4)
                  28.50
                  Trading Advisor's and Trading Manager's
                  Incentive Fees on Trading Profits (5)
                  17.17
                  Brokerage Commissions and Trading Fees (6) 38.00
                  Less Interest Income (7) (28.50)
                  Amount of Trading Income Required for
                  the Fund's Net Asset Value per Unit
                  (Redemption Value) at the End of
                  One Year to Equal the Selling Price per Unit
                  $135.17
                  Percentage of Initial Selling Price per Unit 13.52%

                  Explanatory Notes:

                    (1) Investors will initially purchase units at $1,000. After the commencement of trading, units will be purchased at the Fund's month-end Net Asset Value per unit. A five percent syndication and selling charge will be deducted from each subscription to reimburse the Fund, the General Partner and/or the Clearing Broker for the syndication and selling expenses incurred on behalf of the Fund.
                    (2) Except as set forth in these explanatory notes, the illustration is predicated on the specific rates or fees contracted by the Fund with the General Partner, the Trading Manager, the Trading Advisor, and the Clearing Broker, as described in "Fees, Compensation and Expenses."
                    (3) The Fund's actual accounting, auditing, legal and other operating expenses will be borne by the Fund. These expenses are expected to amount to approximately 2.05 percent of the Fund's Net Asset Value.
                    (4) The Fund's Trading Advisor will be paid a monthly management fee of 1/12 of two percent of Allocated Net Assets. The fund's Trading Manager will be paid a monthly management fee of 1/12 of one percent of allocated Net Assets.
                    (5) The Trading Advisor and Trading Manager will receive incentive fees of 20 percent and five percent, respectively, of Trading Profits exclusive of interest income. The $17.17 of incentive fees shown above is equal to 25 percent of the net of total trading income of $135.17, minus $38 of brokerage commissions and trading fees and $28.50 of management fees.
                    (6) Brokerage commissions and trading fees are estimated at four percent of Net Asset Value.
                    (7) The Fund will earn interest on margin deposits with its Clearing Broker. Based on current interest rates, interest income is estimated at three percent of Net Asset Value.

                  The above break-even analysis is a sample and the fees and expenses included in it may vary from those charged by other commodity pools. The analysis included in an actual disclosure document must include all of the fees and expenses of any type which affect the break-even point of that investment.


                  9024 - RESERVED


                  9025 - COMPLIANCE RULE 2-29: USE OF PROMOTIONAL MATERIAL CONTAINING HYPOTHETICAL PERFORMANCE RESULTS

                  (Board of Directors, February 1, 1996; revised August 29, 1996.)

                  INTERPRETIVE NOTICE

                  Over the years the use of hypothetical performance results has repeatedly produced highly misleading promotional material. By their very nature, such performance results have certain limitations. For example, hypothetical performance results do not represent actual trading and are generally designed with the benefit of hindsight which may under- or over-compensate for the impact of certain market factors, including lack of liquidity and price slippage. Furthermore, since hypothetical trading does not involve financial risk, no hypothetical performance results can completely account for the impact of certain factors associated with risk, including the ability of the customer or the advisor to withstand losses or to adhere to a particular trading program in the face of trading losses. Despite these limitations, there have been numerous instances in which Members in one form or another have attempted to induce customers to place undue reliance on hypothetical results. NFA's Business Conduct Committee has not hesitated to issue charges against Members engaging in such practices and will continue to pay close attention to advertising materials which display hypothetical results.

                  The use of hypothetical results has been the subject of regulatory scrutiny before. In 1981, the Commodity Futures Trading Commission ("CFTC" or "Commission") considered a total ban on the use of such results. Ultimately, the Commission determined to require CPOs and CTAs displaying hypothetical results to display the disclaimer set forth in CFTC Regulation 4.41. The Commission noted at the time that it might well impose sterner measures if the disclaimer proved ineffective at preventing abuses. NFA subsequently required all NFA Members and Associates to display Regulation 4.41's disclaimer in any promotional material which contains such results.

                  In NFA's experience, however, the use of the mandated disclaimer has not prevented recurring abuses in the presentation of hypothetical results. In some instances Members have touted dramatic hypothetical profits without revealing that their actual performance is much worse. This situation has been addressed by an amendment to NFA Compliance Rule 2-29(c)(2) which requires Members advertising hypothetical results to disclose their actual results as well. In other cases Members have effectively diminished the impact of the disclaimer by grossly over-emphasizing the significance of very dramatic hypothetical profits. For example, some Members have utilized promotional material which presents hypothetical rates of return in large, bold face print while the disclaimer can be read only with a magnifying glass. In other advertising pieces the disclaimer is so far removed from the touted hypothetical profits that customers may never find it. There have also been instances in which Members or Associates have attempted to disguise hypothetical performance results as actual performance results.

                  Due to these problems, NFA's Board of Directors recently reviewed whether NFA Members and Associates should be permitted to utilize hypothetical performance results in promotional material. During this review, the Board considered a complete ban on the presentation of these results in promotional material due to its potentially abusive and misleading nature. However, in considering such a ban, the Board also recognized that the presentation of hypothetical performance results in promotional material may have some limited utility in certain circumstances, for example, where a Member has developed a new trading program for which there are no actual trading results. As a result, the Board decided to continue to allow Members and Associates to utilize promotional material containing hypothetical performance results under very stringent restrictions. Hypothetical results will not be allowed, however, for any trading program for which the Member has three months of actual trading results. Any Member or Associate utilizing promotional material which includes hypothetical results shall, at a minimum, adhere to the following requirements.

                  First, any Member or Associate utilizing promotional material which presents hypothetical performance results must provide to customers the disclaimer contained in NFA Compliance Rule 2-29(c)(1). The Board has expanded the required disclaimer to provide a more thorough discussion of the limitations of hypothetical results and of the dangers in placing undue reliance upon them. To prevent the over-emphasis of hypothetical performance results, the disclaimer must be displayed as prominently as the hypothetical results themselves. Generally, this would require that the disclaimer be printed in a type size at least as large as that used for the hypothetical results. Similarly, to avoid circumstances where hypothetical performance results are presented in one section of the promotional material with the disclaimer buried in another, the disclaimer must now immediately precede or follow the performance results. Whenever the Member or Associate has less than 12 months of actual results, the disclaimer must immediately precede the hypothetical performance results. Furthermore, if the promotional material contains several pages of hypothetical performance results, then the Member or Associate may need to include this disclaimer more than once in the material.

                  Second, any Member or Associate utilizing promotional material which presents hypothetical performance results must also describe in the promotional material all of the material assumptions that were made in preparing the hypothetical results. At a minimum, the description of material assumptions must cover points such as initial investment amount, reinvestment or distribution of profits, commission charges, management and incentive fees, and the method used to determine purchase or sale prices for each trade. Members must also make all material disclosures necessary to place the hypothetical results in their proper context, which in some instances may go well beyond the prescribed disclaimer. Furthermore, Members and Associates must calculate hypothetical performance results in a manner consistent with that required under the CFTC's Part 4 Regulations.

                  Third, when any Member or Associate utilizes promotional material which contains both hypothetical and actual performance results, then the actual results must be presented with at least the same prominence devoted to the hypothetical results. Both the hypothetical and actual performance results must be appropriately identified, separately formatted, discussed in an equally balanced manner and calculated pursuant to the same rate of return method. Furthermore, the promotional material must not contain any statement which places undue emphasis on the hypothetical performance results, for example, by discounting or downplaying the significance of any actual performance results.

                  NFA's Board of Directors further notes that, as explained above, the preceding requirements also apply to a Member or Associate's use of promotional material containing a composite performance record showing what a multi-advisor managed account or pool could have achieved if the account's or pool's assets had been allocated among particular trading advisors. In the past, Members have often referred to these composite performance records as pro forma results; however, NFA's Board of Directors believes the pro forma label is misleading. Although the performance for each individual trading advisor is based upon actual results, the selection of and allocation among trading advisors has been done with the benefit of hindsight and, thus, the composite performance record is hypothetical in nature. Therefore, in addition to the preceding requirements, Members and Associates must appropriately label any composite performance record for a multi-advisor managed account or pool as hypothetical and not pro forma. Additionally, because the composite performance record is hypothetical in nature, Members must include a description of all the material assumptions noted above and, in this context, also describe the method used to select and allocate assets among particular trading advisors. The Board also notes that if a Member or Associate previously used promotional material containing hypothetical composite performance records for multi-advisor managed accounts or pools and the hypothetical results were substantially higher than the actual results subsequently obtained by the Member or Associate in allocating assets among the multi-advisors, then this fact must be disclosed in the promotional material.

                  The presentation of hypothetical performance results in promotional material is, of course, subject to all other NFA Requirements. Pursuant to NFA Compliance Rule 2-29 (b)(1) and (2), the ultimate test of any promotional material is whether the overall impact of the material is misleading or is likely to deceive the public. Although NFA has issued this Interpretive Notice, the Board recognizes that it cannot describe every manner in which promotional material containing hypothetical performance results may be misleading. The fact that an NFA Member or Associate has printed the disclaimer required pursuant to NFA Compliance Rule 2-29 and that the promotional material is in facial compliance with this Interpretive Notice does not ensure that material is not misleading.

                  Promotional material which contains hypothetical performance results will continue to be carefully scrutinized by NFA staff. Pursuant to NFA Compliance Rule 2-29(f), Members and Associates presenting hypothetical results in their promotional material must be able to demonstrate to NFA's satisfaction the validity of the presentation of the results. The greater the emphasis on dramatic hypothetical profits, the greater the Member's burden in demonstrating the validity of the presentation.

                  Addressing a different concern, the Board of Directors also believes that hindsight analysis may be misleading as applied to the presentation of extracted performance in which a Member or Associate selects one component of its overall past trading results to highlight to customers. In order to prevent the misleading use of such results, the use of extracted performance is permitted only when a CPO's or CTA's previous disclosure documents designated the percentage of assets which would be committed toward that particular component of the overall trading program. For example, if the previous disclosure document stated that 25 percent of a fund's assets would be dedicated to trading financial futures contracts, and if 25 percent of the fund's assets were in fact dedicated to trading financial futures contracts, the CPO would be allowed to present the extracted performance of its financial futures trading based on net asset values equal to 25 percent of the fund's total net asset value. Performance may also be extracted from a managed account program run by an FCM or IB if these same requirements are met. In other words, the FCM or IB must have previously prepared and distributed to all customers participating in the trading program a written report or similar document which designated the percentage of assets which would be committed toward that particular component of the overall trading program. Oral representations, or written documents which were not distributed to the customers, are not sufficient. Furthermore, any promotional material referring to extracted results must clearly label those results as such and must disclose in an equally prominent fashion the overall actual trading results from which the extracted results were drawn.

                  Lastly, the Board of Directors believes that the use of pro forma performance histories can present useful information to customers, particularly when used to show how the past performance of a given Member or Associate would have been affected by the commission or fee structure which applies to the futures or options contracts, commodity pool, or trading program the Member or Associate is offering, recommending, or providing information on. Therefore, a Member or Associate may use pro forma results to adjust for differences in commissions and fees as long as the pro forma results are not calculated in a misleading manner.


                  9026 - RESERVED


                  9027 - RESERVED


                  9028 - NFA FINANCIAL REQUIREMENTS: THE ELECTRONIC FILING OF FINANCIAL REPORTS

                  (Board of Directors, March 24, 1997; revised July 1, 2000; July 24, 2000; December 31, 2001; October 18, 2010, and January 14, 2016.)

                  INTERPRETIVE NOTICE

                  NFA Financial Requirements require each FCM for which NFA is DSRO, each RFED and each IB which is not operating pursuant to a guarantee agreement to file financial reports with NFA. FCMs and RFEDs must file reports monthly while IBs file on a semi-annual basis. FCMs and RFEDs file reports on CFTC Form 1-FR-FCM while IBs use Form 1-FR-IB. FCMs or IBs which are also registered as securities brokers or dealers may use the SEC FOCUS Report in lieu of the Form 1-FR for their financial reports.

                  NFA, in partnership with the Chicago Mercantile Exchange and the Chicago Board of Trade, has developed computer software which allows FCMs, RFEDs and IBs to electronically file financial reports with NFA, the CME, CBOT and the CFTC. This software is being used industry-wide. The software accommodates filing of the Form 1-FR-FCM, Form 1-FR-IB, FOCUS II and FOCUS IIA Reports, including those required to be certified by a Certified Public Accountant. All FCMs and IBs for which NFA is the DSRO and RFEDs must file their financial reports electronically using this software.

                  NFA's filing software also includes procedures for the appropriate representative of the NFA Member FCM, RFED or IB to attest to the completeness and accuracy of the financial report in order to comply with NFA and CFTC certification and attestation requirements. Each authorized signer must apply to NFA for a Personal Identification Number using an application form approved by NFA.

                  Full details about the software and electronic filing procedures and the application form for obtaining a PIN number are available by accessing the Compliance Section, Issues for FCMs, RFEDs and IBs, of NFA's web site at www.nfa.futures.org or by contacting the Information Center at (312) 781-1410. Information is also available on the Joint Audit Committee's web site at www.jacfutures.com/jac/.


                  9029 - NFA COMPLIANCE RULE 2-10: THE ALLOCATION OF BUNCHED ORDERS FOR MULTIPLE ACCOUNTS

                  (Board of Directors, June 9, 1997; revised September 15, 2003, March 21, 2014)

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-10 adopts by reference CFTC Regulation 1.35, which, among other things, imposes on futures commission merchants (FCMs) and introducing brokers (IB) recordkeeping requirements relating to customer orders on futures and options on futures contracts. The purpose of the regulation is to prevent various forms of customer abuse, such as fraudulent allocation of trades, by providing an adequate audit trail that allows customer orders to be tracked at every step of the order processing system. In general, Regulation 1.35 requires FCMs and IBs receiving a customer order to prepare a written record of the order immediately upon receipt, including an appropriate account identifier.

                  With respect to bunched orders placed by an account manager on behalf of multiple clients, the CFTC interpreted Regulation 1.351 to require that, at or before the time the order is placed, the account manager must provide the FCM with information that identified the accounts included in the bunched order and specified the number of contracts to be allotted to each account.2 3 The CFTC adopted an exception to this requirement in CFTC Regulation 1.35(a-1)(5), which authorized certain eligible account managers, including registered commodity trading advisors (CTAs) to enter bunched orders for a limited class of eligible clients and to allocate them to individual accounts no later than the end of the day ("post-execution allocation procedures").

                  In 2003, the CFTC amended Regulation 1.35(a-1)(5) to effectively remove certain limitations on the account managers that may take advantage of post-execution allocation procedures as well as the limitations on the types of clients on whose behalf the account managers may employ post-execution allocation procedures. In particular, at that time, Regulation 1.35(a-1)(5) permitted CTAs to take advantage of the procedures in Regulation 1.35(a-1)(5) for the accounts of all clients who grant written investment discretion to the CTA.

                  The CFTC's most recent amendment to Regulation 1.35 (effective January 2, 2013), which in addition to redesignating 1.35(a-1)(5) as 1.35(b)(5), expands the list of eligible account managers that may employ post-execution allocation procedures to include FCMs and IBs. Under this amendment, CTAs, IBs and FCMs (collectively "Eligible Account Managers") may now take advantage of the procedures in Regulation 1.35(b)(5) for the accounts of all clients who grant written investment discretion to the CTA, IB or FCM. However, unlike CTAs, FCMs and IBs are prohibited by CFTC Regulation 155.3 and 155.4 from including proprietary trades in a bunched order with customer trades.

                  The amendment does not alter the obligations currently imposed on eligible account managers that wish to take advantage of these post-execution allocation procedures as well as the FCMs that execute or clear these transactions. Among other things, the rule requires that contracts executed pursuant to bunched orders be allocated in a fair and equitable manner so that no account or group of accounts consistently receives favorable or unfavorable treatment over time. The rule further provides that Eligible Account Managers bear the responsibility for the fair and equitable allocation of bunched orders, while FCMs that execute or clear the trade retain the responsibility to monitor for unusual allocation activity.

                  This Notice sets out certain core principles that govern all allocation methodologies and the respective responsibilities of Eligible Account Managers, as well as the FCMs that execute or carry the accounts of the Eligible Account Managers' clients. The Notice also describes certain methodologies that generally meet these core principles. Although these methodologies were developed to assure compliance with the requirement that allocation instructions be provided at or before the time a bunched order is placed, they also apply to post-execution allocation procedures.

                  Core Principles and Responsibilities

                  Allocation instructions for trades made through bunched orders for multiple accounts must deal with two separate issues. The first, which arises in all such orders, involves the question of how the total number of contracts should be allocated to the various accounts included in the bunched order. For some Eligible Account Managers, this allocation may remain relatively constant. For others, although their basic allocation methodology does not change, the specific allocation instructions produced by the methodology may change on a daily basis.

                  The second issue involves the allocation of split or partial fills. For example, an Eligible Account Manager may place a bunched order of 100 contracts for multiple accounts. In many instances, however, a market order for 100 contracts may be filled at a number of different prices. Similarly, if an order is to be filled at a particular price, the FCM that executes the trade may be able to execute some but not all of the 100 lot order. In either example, the question arises of how the different prices or the contracts in the partial fill should be allocated among the accounts included in the block order.

                  The same set of core principles govern the procedures to be used in handling both of these issues. Any procedure for the general allocation of trades or the allocation of split and partial fills must be:

                  • designed to meet the overriding regulatory objective that allocations are non-preferential and are fair and equitable over time, such that no account or group of accounts receive consistently favorable or unfavorable treatment;4

                  • sufficiently objective and specific to permit independent verification of the fairness of the allocations over time and that the allocation methodology was followed for any particular bunched order; and

                  • timely, in that the Eligible Account Manager must provide the allocation information to FCMs that execute or clear the trade as soon as practicable after the order is filled and, in any event, sufficiently before the end of the trading day to ensure that clearing records identify the ultimate customer for each trade.

                  As noted above, the responsibility for allocating contracts executed through a bunched order rests solely with the Eligible Account Manager.5 The Eligible Account Manager must confirm, on a daily basis, that all its accounts have the correct allocation of contracts. An Eligible Account Manager must also analyze each trading program at least once a quarter to ensure that the allocation method has been fair and equitable (i.e., customers in the same trading program achieve similar allocation results over time). Allocation fairness over time, rather than trade-by-trade, is the critical element in this evaluation. If materially divergent performance results exist over time among accounts in the same trading program, such results must be shown to be attributable to factors other than the Eligible Account Manager's trade allocation procedures. Applicable CFTC and NFA interpretations have addressed permitted reasons for divergent performance results among accounts in the same trading program. If those results indicate that the allocation method has not been fair and equitable over time, however, then the Eligible Account Manager must revise its allocation methodology or adopt a different allocation method for application on a prospective basis only. An Eligible Account Manager must document its internal audit procedures and results and maintain these audit procedures and results as firm records subject to review during an NFA examination.

                  Although the Eligible Account Manager is responsible for the allocation of each bunched order, the FCM that executes or clears the trade has certain obligations as well. In particular, each FCM that executes or clears the trade must receive from an Eligible Account Manager sufficient information to allow it to perform its functions. For executing FCMs in a give-up arrangement, this includes, at a minimum, information that identifies the Eligible Account Manager at the time the order is placed and instructions, which the FCM may receive following execution of the order, for the contracts to be given up to each clearing FCM. Information concerning the number of contracts to be allocated to each account included in the bunched order along with instructions for the allocation of split and partial fills among accounts must be provided to the clearing FCM.6

                  Regulation 1.35(b)(5) requires each FCM that executes or carries accounts eligible for post-execution allocation to maintain records that, as applicable, identify each order subject to post-execution allocation and the accounts to which the contracts were allocated. One means by which an FCM can meet this recordkeeping requirement is to maintain a copy of the allocation instructions provided by the Eligible Account Manager by facsimile, e-mail, or other form of electronic transmission. If the allocation is provided orally, however, the FCM must create a written record and maintain that record.

                  Also, if the FCM has actual or constructive notice that allocations for its customers may be fraudulent, the FCM must take appropriate action. For example, if an FCM has notice of unusual allocation activity, the FCM must make a reasonable inquiry into the matter and, if appropriate, refer the matter to the proper regulatory authorities (e.g., the CFTC or NFA or its DSRO). Whether an FCM has such notice depends upon the particular facts involved.

                  Obviously, one of the most significant factors is the amount of information available to the FCM. An FCM that both executes and clears an entire bunched order will possess more information than an FCM that executes or clears only a portion of an order. Where there are multiple FCMs executing and clearing the bunched order, some FCMs may have more information available than others, and it is likely that no single FCM would have enough information to determine if there is unusual allocation activity. Likewise, in situations where an investment adviser uses bunched orders for hedging purposes, the FCM may not possess adequate information to evaluate the allocation activity. However, if the FCM has actual or constructive notice that the allocations may be fraudulent, the FCM must take appropriate action.

                  Examples of Allocation Methodologies

                  The following are examples of procedures for the allocation of split and partial fills that generally satisfy the core principles described above. These methodologies are the most common that NFA has observed in performing examinations. However, they are not the exclusive means of achieving compliance with Regulation 1.35(b)(5). The appropriateness of any particular method, of course, will depend on the Eligible Account Manager's trading strategy.7

                  Example #1 - Rotation of Accounts
                  One basic allocation procedure involves a rotation of accounts on a regular cycle, usually daily or weekly, which receive the most favorable fills. For example, if a firm has 100 accounts trading a particular trading program, in the first phase of the cycle, Account #1 receives the best fill, Account #2 the second best, etc. In phase 2 of the cycle, Account #2 receives the best fill and Account #1 moves to the end of the line and receives the least favorable fill.

                  Example #2 - Random Allocation
                  Some firms prepare on a daily basis a computer generated random order of accounts and allocate the best price to the first account on the list and the worst to the last. This method would satisfy the standards stated above.

                  Example #3 - Highest Prices to the Highest Account Numbers
                  Some firms rank accounts in order of their account numbers and then allocate the highest fill prices to the accounts with the highest account numbers. Any advantage the higher numbered accounts enjoy on the sell order are theoretically offset by the disadvantage on the buy orders. Although under certain market conditions this may not always be true, the method generally complies with the standards.

                  Example #4 - Average Price
                  With regard to split fills, firms may have internal programs which calculate the average price for each bunched order. The program will then assign the average price to each allocated contract. In the alternative, the program will allocate the actual fill prices among the accounts included in the order to approximate, as closely as possible, the average fill price. Either average price allocation method offers a consistent non-preferential method for allocating trades.

                  If any Member has questions concerning how this Interpretive Notice would apply to its operations, please contact NFA's Compliance Department.


                  158 FR 26270 (May 3, 1993)

                  2Bunched orders can provide customers with the advantages of better pricing and more efficient execution of orders. With the explosive growth of the managed funds business, the frequency of "give-ups" and the increasing use of electronic order entry systems, it is not at all uncommon for some account managers to place bunched orders for hundreds of accounts on markets around the world, with orders executed by one or more FCMs and cleared by other FCMs.

                  3Consistent with the provisions of CFTC Regulation 1.35(b)(5), Eligible Account Managers that place orders for a single account must still provide account identification information at the time of order entry.

                  4Because customers must have access to information that allows them to assess the fairness of the allocation process, Eligible Account Managersare required to make the following information available to customers upon request: (1) the general nature of the Eligible Account Manager's allocation methodology; (2) whether accounts in which the CTA may have an interest may be included with customer accounts in bunched orders; and (3) summary or composite data sufficient for that customer to compare its allocation results with the allocation results of other comparable customers and, if applicable, any account in which the Eligible Account Manager has an interest.

                  5However, NFA rules do not preclude an FCM from agreeing to undertake this responsibility, whether it clears or executes the trades, pursuant to either its own procedures or to those supplied by the Eligible Account Manager. For example, the Eligible Account Manager and FCM that executes or clears the trade may agree that the FCM that executes or clears the trade will allocate a bunched order in accordance with instructions that the Eligible Account Manager files with the FCM that executes or clears the trade either prior to or concurrently with placing the bunched order. Any division of responsibilities agreed to by the FCM that executes or clears the trade and Eligible Account Manager should be clearly documented.

                  6As noted, an Eligible Account Manager must provide all of this information to the appropriate FCM as soon as practicable after the order is filled and sufficiently before the end of the trading day during which the order is executed to ensure that clearing records identify the ultimate customer for each trade.

                  7For example, certain allocation methodologies may satisfy the general standards for Eligible Account Managers who trade on a daily basis but be inappropriate for Eligible Account Managers who trade less frequently.


                  9030 - RESERVED


                  9031 - STANDARD LIST OF DOCUMENTS TO BE EXCHANGED UNDER SECTION 8 OF NFA'S CODE OF ARBITRATION

                  (Board of Directors, December 1, 1997; revised April 15, 2011)

                  INTERPRETIVE NOTICE

                  Section 8 of NFA's Code of Arbitration requires the parties to automatically exchange certain documents early in the discovery process. Under this procedure, NFA will identify the standard documents that are routinely relevant for the causes of action alleged in a particular case from this list of documents approved by NFA's Board of Directors. NFA will then notify the parties that they must automatically exchange the standard documents with each other no later than 15 days after the last pleading is due. Except for the list showing the customer's investment experience, a party is not required to obtain or exchange any documents that do not exist or that are not in the party's possession or control.

                  The parties may ask for other documents and information within 30 days after the last pleading is due. The parties may ask for documents on the list which have not been identified for automatic exchange if they believe those documents are also relevant to the claim or defense.

                  A Customer May be Asked to Provide Any or All of the Following:

                  • Account opening documents and forms for the customer's account including, but not limited to, account applications, account agreements, acknowledgment forms, margin agreements, option agreements, option disclosure statements, and other risk disclosure statements.

                  • Records (including billing records), tapes, notes, and transcriptions of tapes of telephone or in-person conversations between the customer and any party named in the arbitration or any employee of a party named in the arbitration.

                  • Any notes made by the customer concerning the customer's account or any transactions in the account.

                  • All contracts or written agreements between the customer and any party named in the arbitration.

                  • Any correspondence or agreements concerning the strategy to be used in trading the account.

                  • All powers-of-attorney giving someone other than the customer the right to trade the account.

                  • Daily confirmation statements for the customer's account.

                  • Monthly activity statements for the customer's account.

                  • A list, to be prepared by the customer, showing the customer's investment experience. For each type of investment the customer has made, the list must contain the type of investment, the names of the firms the customer has done or is doing business with, the account numbers for accounts at each firm, the dates the accounts were opened and, if applicable, the dates the accounts were closed.

                  • Research or marketing materials concerning any trading recommendations made to the customer or concerning any transaction made in the customer's account.

                  • The disclosure document(s) for any trading advisor trading the account.

                  • All notifications the customer received from any party (or employee thereof) named in the arbitration proceeding regarding any price adjustments or system operational difficulties that allegedly occurred on the dates in question.

                  A Member and/or Associate May be Asked to Provide Any or All of the Following:

                  • Account opening documents and forms for the customer's account including, but not limited to, account applications, account agreements, acknowledgment forms, margin agreements, option agreements, option disclosure statements, and other risk disclosure statements.

                  • Any correspondence or agreements concerning the strategy to be used in trading the customer's account.

                  • Daily confirmation statements for the customer's account.

                  • Monthly activity statements for the customer's account.

                  • Margin calls for the customer's account.

                  • All powers-of-attorney giving someone other than the customer the right to trade the account.

                  • Records (including billing records), tapes, notes, and transcriptions of tapes of telephone or in-person conversations between the customer and the broker1, other firm personnel, or the trading advisor.

                  • Any notes made by the broker concerning the customer's account or any transactions in the account.

                  • Registration applications, biographies, resumes or similar documents showing employment history and educational background of the broker and any trading advisor.

                  • Floor and office order tickets and any other documents submitted at the time of the transactions for transactions made in the customer's account.

                  • Research and marketing materials prepared or distributed by the firm, the broker, or the trading advisor concerning any trading recommendation made to the customer or any transaction made in the customer's account.

                  • The index to the firm's compliance manual.

                  • Agreements, contracts or other documents, including guarantee agreements, governing the relationship between the firm introducing the account and the FCM or FDM carrying the account, or between the trading advisor and either the firm introducing the account or the FCM or FDM carrying the account.

                  • Commission runs for the broker who serviced the customer's account.

                  • The disclosure document(s) for any trading advisor trading the account.

                  • All notifications provided to the customer regarding any price adjustments or system operational difficulties that allegedly occurred on the dates in question. This includes notifications the firm received from the applicable counterparty or liquidity provider as well as the notes or internal correspondence regarding the disputed transactions.

                  • The firm’s electronic Trading System Procedures required by NFA Interpretive Notice 9060 – NFA Compliance Rule 2-36(e): Supervision of the Use of Electronic Trading Systems for the period the customer’s account was open.


                  1 In this context, "broker" refers to the individual AP (or APs) who serviced the account.


                  9032 - STANDARD LIST OF DOCUMENTS TO BE EXCHANGED UNDER SECTION 7 OF NFA'S MEMBER ARBITRATION RULES

                  (Board of Directors, December 1, 1997)

                  INTERPRETIVE NOTICE

                  Section 7 of NFA's Member Arbitration Rules requires the parties to automatically exchange certain documents early in the discovery process. Under this procedure, NFA will identify the standard documents that are routinely relevant for the causes of action alleged in a particular case from this list of documents approved by NFA's Board of Directors. NFA will then notify the parties that they must automatically exchange the standard documents with each other no later than 15 days after the last pleading is due. A party is not required to obtain or exchange any documents that do not exist or that are not within the party's possession or control.

                  The parties may ask for other documents and information within 30 days after the last pleading is due. The parties may ask for documents on the list which have not been identified for automatic exchange if they believe those documents are also relevant to the claim or defense.

                  • Records (including billing records), tapes, notes and transcriptions of tapes of telephone or in-person conversations between the parties relating to the matters involved in the dispute.

                  • Any memoranda, notes or other correspondence between the parties relating to the matters involved in the dispute.

                  • Contracts or written agreements between the parties.

                  • Partnership or joint venture agreements.

                  • Corporate documents (i.e., articles of incorporation, by-laws, resolutions, minutes of Board meetings).

                  • Annual reports and financial statements.

                  • Disclosure documents.

                  • Authorizations for transferring accounts or positions from one FCM to another.

                  • Records of security or guarantee deposits made by one party with or for the benefit of another party.

                  • Commission runs.

                  • Customer equity runs.

                  • Registration applications, biographies, resumes or similar documents showing employment history and educational background of the parties.

                  • Employee personnel files, including performance evaluations.

                  • Employee handbooks, including amendments.

                  • Forms 8-T or U-5 for the parties.

                  • Documents showing salary history (including bonuses, commissions and commission pay-outs).

                  • The index to a party's procedures manual.

                  • If the dispute involves a customer account, copies of the customer's account opening documents and forms, monthly activity statements, and daily confirmation statements.


                  9033 - NFA COMPLIANCE RULE 2-29: DECEPTIVE ADVERTISING

                  (Board of Directors, June 4, 1996)

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-29 governs communications between NFA Members and the public. Among other things, the rule prohibits the use of promotional material which is misleading or deceptive. The Board's purposes in adopting this rule were to protect the public from fraudulent advertising and sales solicitations and to provide Members with specific guidance on the standards by which their promotional material would be judged.

                  Recently, a relative handful of Members have used strikingly similar promotional materials, usually in the form of radio or television advertising, which clearly violate both the letter and the spirit of NFA Compliance Rule 2-29. The core problem with all of these promotional materials is that they suggest the strong likelihood that customers will reap dramatic profits by investing with the Member firm when, in fact, nothing in the Member's experience provides any basis for those claims. Typically, these commercials employ a variety of techniques to mislead the public:

                  • Claims Regarding Seasonal Trades- Some Members have suggested almost certain profits from so-called seasonal trades in, among other things, heating oil and unleaded gas. These ads cite historical data which supposedly shows that certain trades produce dramatic profits year in and year out. Invariably, however, the "historical data" involves different products, different time frames or different fee structures. The most telling point, by far, is that the firm's customers have never experienced the types of profits touted by the Member.

                  • Claims Regarding Historic Price Moves- Another frequent theme in these misleading commercials or solicitations is the reference to historic price moves in particular commodities with a suggestion that the same record setting move is likely to occur now. For example, these promotional materials refer to times when sugar traded at $.66 per pound, gold at $800 per ounce and silver at $50 per ounce. By suggesting that a similar movement is imminent, the Member projects that customers can expect to double, triple or quadruple their investments in a short period of time. In point of fact, however, the Member has made similar claims in the past and its customers have never experienced such profits.

                  • "Cherry Picked" Trades- Occasionally, Members seek to entice prospective investors by claiming that their customers have made dramatic profits, for example, citing returns of 50 percent or more on particular trades. When asked to support these claims, the Members rely on isolated trades in specific customer accounts. What these Members fail to say in their commercials and solicitations is that those profitable trades are not at all representative of the overall performance either of that customer's account or its other customers and that, in fact, the customer referred to in the commercial has actually lost money overall.

                  • Profit Projections- Over and over, some Members claim that, based on current market conditions, customers can "turn $10,000 into $40,000," or profits of a similar magnitude. Again, however, the fact is that the Member has not produced anything like the projected profits for its customers in the past.

                  Each of the practices described above presents a distorted and misleading view of the likelihood of customers earning dramatic profits by investing with the Member firm, and each of these practices represents a clear violation of NFA sales practice rules. For those few firms which engage in such practices, the Board wishes to reiterate that Members may not engage in a pattern of advertising or solicitation which makes reference to dramatic profits which could be achieved in the future or could have been achieved in the past by trading futures or options contracts for a particular commodity or in the futures or options markets in general unless the Member can demonstrate to NFA that, based on the past performance of its customers, those claims are not misleading.

                  Any Member making the types of claims referred to above must be able to demonstrate to NFA upon request that the actual performance of its customers supports those claims. Failure to provide adequate documentation will constitute prima facie evidence that the promotional material is misleading.


                  9034 - NFA COMPLIANCE RULE 2-29: DECEPTIVE ADVERTISING

                  (Board of Directors, September 2, 1998)

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-29 prohibits the use of promotional material which is misleading or deceptive. The purpose of the rule is to protect the public from fraudulent advertising and sales solicitations and provide guidance to Members on the standards by which their promotional material will be evaluated.

                  In June 1996, NFA issued a Notice to Members (I-96-11) entitled "Deceptive Advertising." The notice described certain misleading advertising practices that some Members were employing, mainly in radio and TV ads. These included claims suggesting that so-called seasonal trades produce dramatic profits year-in and year-out; claims regarding historic price moves in particular commodities that suggested that the same record setting move was likely to occur again; claims of dramatic profits made by customers based on isolated trades in specific customer accounts (so-called "cherry picked" trades); and claims concerning projected profits, (e.g., "turn $10,000 into $40,000").

                  The June 1996 Notice made clear that NFA would regard these types of claims to be misleading and a clear violation of NFA sales practice rules unless the Member can demonstrate that based on the actual performance of its customers those claims are not misleading. Since the issuance of the June 1996 Notice, NFA has brought a number of disciplinary cases against Members who have employed misleading advertising techniques of the type described in the Notice. Recently, however, NFA has encountered variations of these types of advertising problems. Due to these recent developments, NFA considers it advisable to issue this supplemental Notice.

                  "MATHEMATICAL EXAMPLES OF LEVERAGE" AND DISCLAIMER STATEMENTS

                  NFA has consistently maintained that: 1) it is a violation of NFA's sales practice rules for a Member to mislead customers by suggesting that they have a high probability of achieving dramatic profits trading futures and options unless the Member's customers' performance validates such a claim; and 2) it is permissible for Members to use examples in their advertising to illustrate the effect of leverage in futures and options trading.

                  A problem that has developed is that some Members are improperly using "leverage examples" as a means of suggesting that prospective customers are likely to earn large profits trading futures and options when the past performance of the Members' customers does not support this claim. In some cases, Members will include disclaimer statements in their ads indicating that references to future profits are only "mathematical examples" of the effect of leverage and that no representation is made that any of the Member's customers has achieved or is likely to achieve profits similar to those in the example. Notwithstanding these disclaimers, the entire thrust of the ad is to convey exactly the opposite message. In these circumstances, disclaimer statements will not provide a safe harbor or insulate the Member from liability for a misleading ad which presents a distorted picture of the probability of success trading futures and options.

                  A variation of this technique involves highlighting the tremendous profits which will result from projected price movements which are characterized, directly or indirectly, as conservative estimates when, in fact, such price movements would be dramatic. Ads that use this technique are highly misleading.

                  USING PRICE MOVES FOR ONE PRODUCT TO SOLICIT INVESTORS FOR A DIFFERENT PRODUCT

                  An additional problem that NFA has noted with some recent ads, particularly those which refer to seasonal trades and historical prices, is that they refer to historical price data for different products than the investment products being sold. For example, ads for options often cite price data relating not to options but to cash or futures prices of the underlying commodity. This practice can be highly misleading. Options prices do not necessarily move in tandem with cash or futures prices. In fact, in many of these ads, the price of the options which are being sold only move a fraction of the price move in the underlying futures.

                  Historical pricing data must be for the product being marketed. Thus, if a Member is soliciting for options, then any pricing data that is used must refer to the historical premium value of the option that most closely resembles the type of option that is being marketed; it would be improper, for example, to cite historical price moves relating to at-the-money options when marketing out-of-the-money options. Promotional material that uses historical price data for a product different from the one being marketed in the promotional material will be considered per se misleading and a violation of NFA's sales practice rules.

                  Examples of the types of ads that NFA will regard as misleading include:

                  • ads that use pricing data relative to the cash or futures markets to sell options

                  • ads that use pricing data for at-the-money options to sell out-of-the-money options

                  • ads that use pricing data which does not include commissions and fees comparable to those charged by the Member

                  An ad touting seasonal trades can also be misleading, even if it uses historical pricing data for the same product that is being offered for sale, if it cherry picks optimal entry and exit prices and suggests that they demonstrate a consistent price trend when no such consistent price trend exists. For example, it is misleading to claim that heating oil options always go up in value from summer lows to winter highs when heating oil - like all commodity markets - has peaks and valleys and one would incur losses during purported seasonal periods by buying at the high and selling at the low.


                  9035 - RULE 2-35. CPO/CTA DISCLOSURE DOCUMENTS

                  (Board of Directors, April 30, 1999)

                  INTERPRETIVE NOTICE

                  A Disclosure Document should provide essential information about the fundamental characteristics of a pool, and it should provide the information in a way that will assist investors in making informed decisions about whether to invest in the pool. Because investors who rely on the Disclosure Document may not be sophisticated in legal or financial matters, the information in the Disclosure Document should be written in clear, concise, and understandable language using plain English principles. If a Disclosure Document uses frequent technical or legal terminology, complex language, excessive detail, and extended discussions of legal requirements, the Disclosure Document becomes difficult for many investors to understand and may, therefore, defeat its purpose.

                  Compliance Rule 2-35 requires the Disclosure Document to be as clear and concise as possible and to use plain English principles. In particular, Disclosure Documents should be written:

                  • In the active voice;

                  • Using short sentences and paragraphs;

                  • Breaking up the document into short sections, using titles and sub-titles that specifically describe the contents of each section;

                  • Using words that are definite, concrete, and part of everyday language;

                  • Avoiding legal jargon and highly technical terms;

                  • Using glossaries to define technical terms that cannot be avoided;

                  • Avoiding multiple negatives;

                  • Saying something once where it is most important rather than repeating information;

                  • Using tables and bullet lists, where appropriate.

                  Obviously, these are not hard and fast rules. For example, there may be times when something is so important that it should be said more than once. However, the Disclosure Document should substantially comply with the plain English principles described here.

                  Compliance Rule 2-35 also limits the information the CPO can include in the Disclosure Document. The Disclosure Document must include most of the information required by the CFTC's Part 4 Rules. It must also include any other information necessary to understand the fundamental characteristics of the pool or keep the Disclosure Document from being misleading. The Disclosure Document may also include information required by the Securities and Exchange Commission and state securities administrators. Such information currently includes items such as:

                    (i) Any cautionary statement required by the Securities and Exchange Commission or a state securities administrator for a state where the pool is required to be registered;
                    (ii) A concise description of the investment objectives, policies, and principal strategies of the pool, including a brief discussion of the circumstances under which these objectives or policies can be changed;
                    (iii) For a pool that has been in operation for a full fiscal year, the compensation paid to all major CTAs for the most recent fiscal year as a percentage of average net assets. For a pool that has not been in operation for a full fiscal year, a general statement of what the major CTAs' fees will be as a percentage of average net assets. (Major CTAs are defined in CFTC Regulation 4.1((i));
                    (iv) A brief description of any services provided by the major CTAs beyond those customarily provided by a CTA;
                    (v) The identity of any person who provides significant administrative or business affairs management services to the pool with a brief description of the services provided and the compensation paid for these services;
                    (vi) The name and principal address of the selling agent;
                    (vii) If the pool has more than one class or series of securities offered or outstanding, a description of the characteristics of each class or series of securities, including dividend rights, liquidation rights, conversion rights, and redemption provisions;
                    (viii) A description of how participant inquiries should be made;
                    (ix) A description of how an investment in the pool is made, including the identity of the principal underwriter, if applicable;
                    (x) The minimum initial or subsequent investment amount;
                    (xi) A description of how the price of pool units is determined (if the purchase price of a unit is based on the net asset value at a specified date, it is sufficient to state this); and
                    (xii) If applicable, a statement that information about the pool, including the Statement of Additional Information, can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C.; that information on the operation of the public reference room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330; that reports and other information about the pool are available on the Securities and Exchange Commission's Internet site at http://www.sec.gov; and that copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the Securities and Exchange Commission, Washington, D.C. 20549-6009.

                  The Disclosure Document may not include any additional information. The CPO can, however, provide additional information in a Statement of Additional Information.

                  Disclosure Documents for single-advisor pools should usually be 30 pages or less. Disclosure Documents for more complex pools, such as multi-advisor pools or principal-protected pools, should not usually exceed 40 pages. However, longer Disclosure Documents will still comply with Compliance Rule 2-35 if they use the principles listed above and contain only the information allowed by Compliance Rule 2-35(b). And shorter Disclosure Documents will still violate Compliance Rule 2-35 if they are unnecessarily hard to read and understand.


                  9036 - RESERVED


                  9037 - NFA COMPLIANCE RULE 2-9: SUPERVISORY PROCEDURES FOR E-MAIL AND THE USE OF WEB SITES

                  (Board of Directors, August 19, 1999)

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-9 requires Members and Associates with supervisory duties to diligently supervise employees and agents in the conduct of their commodity futures activities for or on behalf of the Member. The rule is broadly written to provide Members with flexibility in developing procedures tailored to meet their particular needs. On certain issues, however, NFA has issued Notices to Members to provide more specific guidance on acceptable standards for supervisory procedures. Currently, information technology is changing nearly every aspect of how Members conduct business, including how they communicate with their customers. For example, e-mail and internet-based communications have enabled Members and their employees and agents to communicate with customers more frequently and efficiently. Expanded use of this technology, however, also requires Members to re-examine their methods of supervising their communications with the public.

                  This Notice addresses the supervisory issues raised by use of e-mail and web sites to conduct futures-related business. Although this Notice does not specifically address every aspect of electronic communication, such as the use of chat rooms to conduct business or after-hours electronic trading activity, this is not intended to suggest that Members have no supervisory obligations regarding these types of activities. Consistent with the approach taken in this Notice, in establishing supervisory procedures for electronic communications, Members may wish to draw from their experience in supervising non-electronic communications.

                  E-Mail

                  A Member's duty to supervise the use of futures-related e-mail by its employees and agents is basically the same as its duty to supervise other forms of correspondence. NFA would expect each Member to adopt review procedures that are appropriate in light of its business activities, including the structure, size and nature of its business operations. Like other supervisory procedures, a Member's supervisory procedures with respect to e-mail must:

                  • be in writing; and

                  • identify by title or position the person responsible for conducting the review.

                  In addition, firms may wish to consider whether the following procedures would be appropriate as well:

                  • specify how and with what frequency e-mails will be reviewed and how that review will be documented; and

                  • categorize what type of e-mail will be pre-reviewed or post-reviewed.

                  Each Member is free to adopt the specific procedures that it will use to conduct its review. However, those procedures must take into consideration the nature of the communication, the relative sophistication of the recipient and the training and background of the employees and agents. In some instances, spot-checking or sampling e-mail messages representing routine communications between employees or agents and existing customers may be appropriate and in others it may not. For example, a firm dealing with sophisticated or institutional customers might choose to sample a relatively small but representative amount of the routine electronic correspondence to review. On the other hand, firms dealing with individual, relatively unsophisticated retail customers might consider using a larger sample or even reviewing all the routine e-mail. Similarly, a firm may wish to conduct a comprehensive review of employees' and agents' e-mail if they have a disciplinary history involving problems with customers or came from a firm that has been disciplined for fraud.

                  Members' procedures should also address whether employees and agents are permitted to use e-mail systems other than the firm's system. If a firm permits them to use other systems for business purposes, whether on their work or home computer, the firm's procedures must treat these off-system e-mails as its own records and must ensure that the firm is capable of adequately reviewing them. Given the supervisory problems which could arise, some firms may choose not to permit their employees and agents to communicate with the public outside of work through an e-mail system that is not linked to the firm's network.

                  In many instances e-mails may constitute promotional material. E-mail directed to the public soliciting business constitutes advertising and is subject to the same rules as any other form of promotional material. For example, an e-mail message sent to targeted individuals or groups would be considered promotional material if its ultimate purpose was to solicit funds or orders. A Member's e-mail review procedures must be designed to ensure compliance with NFA's promotional material content and review requirements. These requirements, found in NFA Compliance Rule 2-29, provide, among other things, for prior review of this type of e-mail by appropriate supervisory personnel. Additionally, this type of e-mail is subject to the specific recordkeeping requirements of Compliance Rule 2-29.

                  Members should properly educate and train their employees and agents on the firm's policies regarding e-mail communications - particularly on those communications that are not reviewed by supervisory personnel prior to use. Special attention should be given to those employees and agents with previous compliance or disciplinary problems. Finally, Members must periodically evaluate the effectiveness of their e-mail review procedures and modify them as necessary.

                  Web Sites

                  Both Members and their employees and agents can inexpensively and quickly create web sites to attract business. NFA's Compliance Rule 2-29 establishes the standards that web site content must meet. The procedures that Members adopt to supervise the use of web sites must be designed and enforced to ensure that the web sites comply with these standards. These supervisory procedures must:

                  • be written;

                  • require prior review and approval of the web site by an appropriate supervisor; and

                  • require documentation of the review.

                  Because the substantive content of web sites can change frequently, the Member's procedures should address how it will ensure that each substantively new version of a web page will be subject to the review procedures. Members' review procedures should adequately address features unique to electronic communications, e.g., streaming script containing real-time market news, for which neither prior review nor post-review of each bit of information may be possible.

                  Unless the web site limits access to a particular target audience, through an acknowledgment by the user or other means, the Member's review procedures should take into consideration the fact that the web site, like other forms of mass media advertising, is available to the public at large. If the firm permits its employees and agents to use personal web sites to attract business for the firm, these web sites will constitute firm promotional material. Consequently, the Member's procedures must be adequate to enable it to properly review the employees' and agents' web sites, including all substantive modifications, according to its procedures. Additionally, to ensure compliance with the recordkeeping requirements, the firm's procedures should provide the means to identify the time frame in which particular versions of the web page are in use. Finally, Members must periodically evaluate and modify as necessary their web site review procedures to ensure their effectiveness.

                  As is the case with other media, the use of agents' web sites to solicit leads may subject a firm to liability if the agents' leads were generated through deceptive materials posted on a web site. If a firm (either non-Member or Member) maintains a web site which contains deceptive information regarding futures or options trading and a Member pays that firm to provide a hyperlink to the Member's web site, the Member may well be held accountable for the content of the other firm's web site.

                  The fact that a Member creates a hyperlink from its web site to another web site does not, in and of itself, make the Member firm accountable for the content of the other web site. Member firms should bear in mind, though, that their supervisory obligations under Rule 2-9 and Rule 2-29 require them to diligently supervise their employees and agents who are responsible for creating and maintaining the web sites, including hyperlinks to other web sites. Members should consider whether appropriate supervisory procedures include periodic inquiries as to whether their employees and agents are monitoring the general content of the web site to which the Member links. NFA is not suggesting that firms are necessarily responsible for the virtually infinite chain of links from its web site to others. At the same time, Members who seek to circumvent NFA promotional material and supervision rules by using a chain of hyperlinks to a "remote" web site may be held accountable for that "remote" web site's content.


                  9038 - NFA COMPLIANCE RULES 2-29: HIGH PRESSURE SALES TACTICS

                  (Staff, June 19, 1996)

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-29 governs Members' communications with the public and is one of the most important NFA rules in ensuring that Members observe high ethical standards in their dealings with customers. NFA Compliance Rule 2-29(a)(2) prohibits the use of "high-pressure sales practices." The rule itself does not define "high-pressure sales practices." However, there have been a significant number of NFA enforcement cases prosecuted under the rule, and those cases provide guidance to Members on the types of practices which have been found to constitute high-pressure sales practices.

                  A common thread in many of the high-pressure sales cases brought by the Business Conduct Committee is the sense of undue urgency which the associated person conveys to the customer. In essence, the AP is asking the customer to act now and think later. This approach can take several different forms. In some cases, the AP rushes the customer through the account opening forms, glossing over the risk disclosure in his haste to open the account. Frequently, an overnight courier service delivers the blank forms to the customer and waits while the customer completes the form. In some cases, APs have actively attempted to dissuade unsophisticated customers from seeking further advice on their investment decision from friends, relatives or advisors or have tried to threaten or intimidate customers. The purpose of NFA's rule is to ensure that the customer makes a fully informed and carefully considered investment decision. Any tactic, such as those outlined above, which presses a customer for a hasty decision will be considered a violation of NFA Compliance Rule 2-29(a)(2).

                  Another familiar theme in NFA's high-pressure sales cases involves a pattern of telephone calls which are unusual in their timing or frequency. In several cases, the AP barraged the customer with calls either late at night or early in the morning. In other cases, the AP's telephone solicitations to open an account occurred several times a day, several days a week for weeks on end. Phone calls made at unusual hours and with unusual frequency, unless made at the customer's request, can be an abusive practice, designed to abuse, annoy or harass a customer into opening an account and constituting a violation of NFA Compliance Rules.

                  Perhaps the most obvious indicator of a high-pressure sales practice is simply the tone used by the AP to address the customer. In a handful of cases, APs have shouted at customers, used profane language or otherwise berated the customer in an attempt to bully the customer into opening an account. Such conduct clearly violates NFA rules.

                  This notice cannot and is not intended to alert Members to all of the factors that may constitute a high-pressure sales practice. Each of the factors highlighted above, however, has frequently been present in the high-pressure sales cases brought by NFA, and Members should certainly be vigilant in preventing and detecting such practices in their own operations.


                  9039 - NFA COMPLIANCE RULES 2-29 AND 2-9: NFA'S REVIEW AND APPROVAL OF CERTAIN RADIO AND TELEVISION ADVERTISEMENTS

                  (Board of Directors, March 28, 2000

                  INTERPRETIVE NOTICE

                  NFA Compliance Rule 2-29 governs communications between NFA Members and the public. Among other things, the rule prohibits the use of promotional material which is misleading or deceptive. The purpose of this rule is to protect the public from fraudulent advertising and sales solicitations and to provide guidance to Members on the standards by which their promotional material will be evaluated.

                  Over the last few years, NFA's Board of Directors ("Board") has become increasing concerned with several types of misleading radio and television advertisements that a small number of Member and non-Member firms are using with greater frequency. Though these problem ads vary somewhat, their consistent theme is that customers are likely to make substantial profits by following the sponsoring firm's recommendations. These advertisements hurt both the customers naive enough to believe the claims and the reputation of the industry. Though NFA's current compliance rules provide a basis for prosecuting the Members who either sponsor such ads or reap any benefits from the ads, the Board has always felt that it is better to prevent than prosecute fraud.

                  To achieve this goal, the Board recently amended NFA Compliance Rule 2-29 to add a new subsection (h) to require any Member firm using or directly benefiting from a radio or television advertisement that makes any specific trading recommendation or refers to or describes the extent of any profit obtained in the past or that can be achieved in the future to submit the advertisement to NFA's Promotional Material Review Team for its review and approval at least 10 days prior to first use. If additional information is needed, or the review cannot be completed within the 10 day period, the Member will be so notified. Obviously, NFA staff will not be able to independently verify the accuracy of every statement made in an advertisement within the 10 day review period; that responsibility remains with the Member. Therefore, submitting promotional material to NFA will not provide a "safe harbor" from NFA actions for Members if misstatements or omissions of material fact are discovered subsequently or NFA otherwise later determines that the material is in violation of standards set forth herein.

                  At this time, the Board also wishes to reiterate that two prior Notices to Members dated June 4, 1996 (I-96-11) and September 2, 1998 (I-98-15) describe particular fraudulent techniques that a relative handful of Members use in their radio and television advertisements. NFA's Business Conduct Committee ("BCC") has not hesitated to issue a number of Complaints against Member firms utilizing the techniques mentioned in those Notices. Furthermore, after recently reviewing the particular types of radio and television advertisements forming the basis of these BCC Complaints, the Board has directed staff to be particularly vigilant in reviewing radio and television advertisements containing specific trading recommendations and/or a description of past or future profits. In fact, the Board finds the content of certain advertisements to be inherently misleading and has further directed staff to disapprove of their usage. Typically, these advertisements include one or more of the following practices, each of which is described in the prior Notices:

                  • Claims Regarding Seasonal Trades: These ads cite seasonal data which supposedly shows that certain trades produce dramatic profits year in and year out in such products as heating oil in the winter and unleaded gas in the summer.

                  • Claims Regarding Historic Price Moves - These ads refer to historic price moves in particular commodities such as sugar when it was trading at $0.66 per pound, gold at $800 per ounce and silver at $50, with a suggestion that the same record setting move is likely to occur again.

                  • Claims Regarding Price Movements - These ads highlight the tremendous profits which will result from projected price movements which are characterized, directly or indirectly, as conservative estimates when, in fact, such price movements would be dramatic.

                  • Claims Using Certain Pricing Data - These ads use price data for a product different from the one being marketed in the promotional material. Examples of these types of ads include: ads that use pricing data relative to the cash or futures markets to sell options; ads that use pricing data for at-the-money options to sell out-of-the money options; and ads that use pricing data that do not include commissions and fees comparable to those charged by the Member.

                  • Claims Containing Profit Projections - These ads claim that customers can turn a $10,000 investment into $25,000 or make similar types of dramatic profit projections.

                  • Claims Containing "Cherry Picked" Trades - These ads seek to entice prospective investors by claiming that their customers have made dramatic profits; however, such claims rely on isolated trades in specific customer accounts.

                  • Claims Regarding Mathematical Examples of Leverage - These ads improperly use "leverage examples" as a means of suggesting that prospective customers are likely to earn large profits trading futures and options.

                  It is important to note that this list of deceptive advertising techniques is not all inclusive. Each of the practices described above presents a distorted and misleading view of the likelihood of customers earning dramatic profits by investing with the Member, and each of these practices represents a clear violation of NFA's sales practice rules.

                  Finally, one additional issue relating to advertising occurs when a Member benefits from the use of a "blind ad." Specifically, some Members attempt to evade NFA's advertising requirements by purchasing leads from non-Members that run misleading radio and television commercials basically identical to those prosecuted by NFA's BCC. These ads do not identify any particular Member firm and invite the viewer to call a toll-free number to obtain more information. The non-Member then sells the resulting leads to a Member firm, which then claims that it has no responsibility for the content of the ad. Members can not evade their supervisory responsibilities by buying leads from such firms.

                  NFA Compliance Rule 2-9 requires each Member to diligently supervise its employees and agents in the conduct of their commodities futures activities. The CFTC has brought cases against companies that run "blind ads" and has alleged that they are, in fact, soliciting orders and are required to be registered as IBs. In addition to a Member's responsibilities under NFA Bylaw 1101, the Board believes that Member firms have a supervisory duty to ensure, to the extent possible, that their employees and agents are not purchasing leads from non-Members required to be registered and/or using fraudulent advertising practices.

                  In many instances, a Member firm will have direct knowledge of the source of leads that the Member purchases. For example, the Member firm purchases leads from a provider that generates leads solely incidental to some other business purpose (e.g., a subscription list). However, in the event a Member firm does not have direct knowledge, then the Member firm has a duty to inquire as to the source of leads. Specifically, under those circumstances, a Member firm has an affirmative duty to determine if the leads were generated from a provider using any type of advertisement soliciting investments in futures, one of whose business purposes is the generation and sale of the leads. If a Member firm purchases leads from such a provider, then the Member must ensure, prior to soliciting any customer with the leads, that the lead provider submitted the advertisement to NFA for review and approval pursuant to Compliance Rule 2-29(h). If the advertisement was not approved by NFA, then the Member is not permitted to solicit any customer with the leads purchased from that provider.


                  9040 - RESERVED


                  9041 - OBLIGATIONS TO CUSTOMERS AND OTHER MARKET PARTICIPANTS

                  Board of Directors, August 21, 2001; revised September 10, 2001)
                   
                  INTERPRETIVE NOTICE

                  The Commodity Futures Modernization Act of 2000 (CFMA), which was signed into law on December 21, 2000, lifts the 18-year ban on single-stock futures and narrow-based security indices ("security futures products"). Unlike other futures contracts, however, the CFMA provides that security futures products are securities as well as futures. Therefore, under Section 15A(k) of the Securities Exchange Act of 1934 (Exchange Act), NFA is a national securities association (NSA) for the limited purpose of regulating the activities of Members who are registered as brokers or dealers in security futures products under Section 15(b)(11) of the Exchange Act (i.e., FCMs and IBs who "passport" in to broker-dealer registration because they limit their securities activities to security futures products).

                  Since NFA is a registered futures association, the Commodity Exchange Act requires it to have rules designed to promote fair dealing with customers and other market participants for all futures contracts, including security futures.1 Since NFA is a limited purpose NSA, the Exchange Act also requires it to have rules that are designed to promote fair dealing for security futures products.2 All of NFA's rules apply to activities involving security futures products. However, certain additional requirements apply to activities in security futures products by Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates.

                  NFA Compliance Rule 2-4 requires all Members and Associates to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business. This includes a requirement to deal fairly with customers and other market participants at all times. This interpretive notice reminds all Members and Associates of their obligation not to trade ahead of customer orders in any commodity. It also discusses those fair dealing obligations that are unique to security futures products.

                  Trading Ahead of Customer Orders

                  CFTC Regulations 155.3 and 155.4 — which are incorporated into NFA rules through Compliance Rule 2-26 — require FCMs and IBs to establish and enforce internal rules, procedures, and controls to insure, to the extent possible, that those firms and their employees do not trade ahead of customer orders that are executable at or near the market price. Literally read, those regulations require procedures but do not contain an outright prohibition on trading ahead. However, knowingly trading ahead of customer orders in any commodity violates NFA Compliance Rule 2-4, which requires Members and Associates to observe high standards and just and equitable principles of trade.

                  Further, Compliance Rule 2-4 also requires Members and Associates to exercise due care to avoid trading ahead of customer orders. Members and Associates will be considered to be exercising due care if they do not know or should not reasonably have known of the customer order. For example, absent knowledge, a Member will not be held accountable for trading ahead of customer orders that originate in a different branch office or for proprietary orders that originate in a trading department that does not have access to information regarding customer orders.

                  Trading Based on Material, Non-Public Information

                  Other than trading ahead, the Commodity Exchange Act, CFTC regulations, and NFA and exchange rules do not generally prohibit trading futures based on material, non-public information.3 The securities laws, on the other hand, generally do prohibit this conduct. As required by the CFMA, NFA Compliance Rule 2-37(a) prohibits Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates from violating Sections 9(a), 9(b) and 10(b) of the Exchange Act and the regulations thereunder in connection with security futures products. Insider trading and other forms of trading based on material, non-public information that are violations of SEC Rule 10b-5 would also be violations of NFA Compliance Rule 2-37(a).4

                  Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates may not purposefully establish, increase, decrease, or liquidate a position in any security futures product in anticipation of the issuance of a research report regarding the underlying security or a derivative based primarily upon the underlying security (including the security futures product itself). Members should consider developing and implementing firewalls to isolate specific information within research and other relevant departments of the firm so as to prevent the trading department from utilizing the advance knowledge of the issuance of the research report. Firms that choose not to develop these firewalls bear the burden of demonstrating that the change in position was not done in anticipation of the issuance of the report.

                  Block Orders

                  It shall be considered conduct inconsistent with just and equitable principles of trade for a Member registered as a broker-dealer under Section 15(b)(11) of the Exchange Act or an AP of such a Member, acting for an account in which such Member or AP has an interest, for an account with respect to which such Member or AP exercises investment discretion, or for certain customer accounts, to cause to be executed:

                    (a) an order to buy or sell a security futures product when such Member or AP causing such order to be executed has material, non-public market information concerning an imminent block transaction in the underlying security, or when the customer has been provided such material non-public market information by the Member or AP; or
                    (b) an order to buy or sell an underlying security when such Member or AP causing such order to be executed has material, non-public market information concerning an imminent block transaction in a security futures product overlying that security, or when the customer has been provided such material, non-public market information by the Member or AP;

                  prior to the time information concerning the block transaction has been reported to the exchange.5

                  The violative practice noted above may include transactions which are executed based upon knowledge of less than all of the terms of the block transaction, so long as there is knowledge that all of the material terms of the transaction have been or will be agreed upon imminently. A Member will not, however, violate this requirement if it has exercised due care to avoid trading on that information and the individual or individuals causing the order to be executed do not know and should not reasonably have known about the imminent block transaction.

                  The general prohibitions stated above shall not apply to transactions executed by member participants in automatic execution systems in those instances where participants must accept automatic executions. These prohibitions also do not include situations in which a Member or AP receives a customer's order of block size relating to both security futures product and the underlying security. In such cases, the Member and AP may position the other side of one or both components of the order. However, in these instances, the Member and AP would not be able to cover any resulting proprietary position(s) by entering an offsetting order until information concerning the block transaction involved has been reported to the exchange.

                  Additionally, a contract market or derivatives transaction execution facility may have a specific rule that permits block transactions that are privately negotiated. Pursuant to these rules, a block transaction must be reported to a designated exchange official and/or the exchange's clearing house within a specified time period after execution of the block transaction. During this time period after execution but prior to reporting, Member firms that are a party to the block transaction have a legitimate need to hedge their own risk exposure. Therefore, the general prohibitions stated above shall not apply to transactions executed by Member firms if done in conjunction with hedging the Member firm's own risk in a block transaction executed under the applicable rules of a contract market or derivatives transaction execution facility.

                  A transaction involving 10,000 shares or more of an underlying security or security futures product covering such number of shares is generally deemed to be a block transaction, although a transaction of less than 10,000 shares could be considered a block transaction in appropriate cases. A block transaction that has been agreed upon does not lose its identity as such by arranging for partial executions of the full transaction in portions which themselves are not of block size if the execution of the full transaction may have a material impact on the market. In this situation, the requirement that information concerning the block transaction be reported to the exchange will not be satisfied until the entire block transaction has been completed and reported to the exchange.

                  Communications with the Public

                  Under NFA Compliance Rules 2-4 and 2-29(a)(1), all communications with the public regarding security futures products must be based on principles of fair dealing and good faith and no material fact or qualification may be omitted if the omission, in the light of the context of the material presented, would cause the communication to be misleading. Furthermore, Members registered under Section 15(b)(11) of the Exchange Act and their Associates should provide a sound basis for evaluating the facts regarding any particular security futures product, including facts regarding the underlying security, industry, or group of securities.


                  1See Section 17(b)(7) of the Commodity Exchange Act (7 U.S.C. 21(b)(7)).

                  2See Section 15A(k)(2)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3(k)(2)(B)).

                  3CFTC Regulation 1.59 prohibits self-regulatory organization board and committee members from using or disclosing material, non-public information obtained as part of their service on the board or committee. Depending on the circumstances, Members and Associates may also violate a fiduciary obligation by trading on material, non-public information obtained from their customers or employer or making use of information that the Member or Associate knows was wrongfully disclosed.

                  4Although Compliance Rule 2-37(a) applies only to Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates, all Members and Associates are subject to the securities laws in connection with their security futures activities. Violating any law that applies to a Member or Associate's futures business — including securities laws that apply to security futures activities — is conduct inconsistent with just and equitable principles of trade under NFA Compliance Rule 2-4.

                  5Commodity pool operators and commodity trading advisors who engage in similar conduct would violate NFA Compliance Rule 2-4 if they abuse their fiduciary relationship with pool participants or clients.


                  9042 - COMPLIANCE RULE 2-9: SPECIAL SUPERVISORY REQUIREMENTS FOR MEMBERS REGISTERED AS BROKER-DEALERS UNDER SECTION 15(b)(11) OF THE SECURITIES EXCHANGE ACT OF 1934

                  (Board of Directors, August 21, 2001; revised December 17, 2007)

                  INTERPRETIVE NOTICE

                  The Commodity Futures Modernization Act of 2000 (CFMA), which was signed into law on December 21, 2000, lifts the 18-year ban on single-stock futures and narrow-based security indices ("security futures products"). Unlike other futures contracts, however, the CFMA provides that security futures products are securities as well as futures. Therefore, under Section 15A(k) of the Securities Exchange Act of 1934 (Exchange Act), NFA is a national securities association (NSA) for the limited purpose of regulating the activities of Members who are registered as brokers or dealers in security futures products under Section 15(b)(11) of the Exchange Act (i.e., FCMs and IBs who "passport" in to broker-dealer registration because they limit their securities activities to security futures products).

                  NFA Compliance Rule 2-9 places a continuing responsibility on every Member to diligently supervise its employees and agents in all aspects of their futures business. Compliance Rule 2-9 and the interpretive notices issued under Compliance Rule 2-9 apply to activities involving security futures products just as they do to all other futures-related activities. When regulating the securities futures activities of Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act, however, Section 15A(k)(2)(B) of the Exchange Act requires NFA to impose requirements reasonably comparable to those of national securities associations registered under Section 15A(a) of the Exchange Act. This notice describes special supervisory requirements for those Members.1

                  A Member's security futures activities must be supervised by a designated security futures principal who meets the requirements of NFA Compliance Rule 2-7. A Member must also have one or more designated security futures principals at each main or branch office that solicits or accepts accounts or orders for or recommends or engages in transactions in security futures products on behalf of customers. The Member must have clear lines of supervision that assign each registered individual engaged in security futures activities to a particular designated security futures principal.

                  Members must develop and implement specific written procedures concerning the manner of supervision of customer accounts that trade security futures products and specifically providing for frequent supervisory review of those accounts. Within a reasonable time, Members must amend their procedures to incorporate applicable changes in the futures and securities laws and regulations and NFA requirements as well as changes in their supervisory systems. Each designated security futures principal shall be responsible for reviewing and enforcing the procedures and taking or recommending to senior management appropriate action reasonably designed to achieve the Member's compliance with the applicable futures and securities laws and regulations and with NFA requirements.

                  Each main or branch office that solicits or accepts accounts or orders or recommends or engages in transactions in security futures products - and each office that supervises these activities - must keep and maintain a current copy of the Member's written supervisory procedures governing these activities. Members must communicate all changes in the procedures to the appropriate offices.

                  Discretionary Accounts

                  Under Compliance Rule 2-8(b), a security futures principal must regularly review discretionary security futures trading activity and must make a written record of that review. A security futures principal must also consider the discretionary nature of the account when approving the account to trade security futures and must comply with the requirements of the interpretive notice entitled "Compliance Rule 2-9: Supervision of Branch Offices and Guaranteed IBs" (9019) regarding account activity and discretionary accounts.

                  Promotional Material and Correspondence

                  Members must comply with the interpretive notice entitled "NFA Compliance Rule 2-9: Supervisory Procedures for E-Mail and the Use of Web Sites" (9037) for security futures products. E-mails are not the only type of security futures correspondence that must be reviewed, however. Both incoming and outgoing correspondence must be reviewed, and the designated security futures principal must make a record of the review, including noting who conducted the review. The review must include steps to ensure that all correspondence is retained and that the names of the persons who prepared outgoing correspondence are ascertainable from the retained record.

                  Members must adopt review procedures that are appropriate in light of their business activities, including the structure, size, and nature of their business operations. In establishing criteria for review of correspondence, the procedures must take into consideration the nature of the communication, the relative sophistication of the customer and the training and background of the Member's employees or the employees of its guaranteed IBs. In some instances, spot-checking or sampling correspondence may be appropriate and in others it may not. For example, a firm dealing with sophisticated or institutional customers might choose to sample a relatively small but representative amount of correspondence, while firms dealing with individual, relatively unsophisticated retail customers must use a larger sample or even review all outgoing correspondence. Similarly, if any employee or employee of a guaranteed IB has a disciplinary history involving problems with customers or was previously employed at a firm that has been disciplined for fraud, then the firm must have a heightened level of scrutiny regarding that employee's correspondence.

                  In many instances outgoing correspondence may constitute promotional material. Correspondence directed to the public soliciting business constitutes promotional material and is subject to the same rules as any other form of promotional material. For example, a letter or e-mail message sent to targeted individuals or groups is promotional material if its ultimate purpose is to solicit funds or orders. Therefore, a Member's correspondence review procedures must also be designed to ensure compliance with NFA's promotional material content and review requirements.

                  Where the firm's procedures for the review of correspondence do not require review of all outgoing correspondence prior to its use or distribution, Members must educate and train their employees on the firm's policies regarding correspondence with the public. Special attention should be given to those employees with previous compliance or disciplinary problems.

                  Account Approval

                  Under NFA Compliance Rule 2-30(j)(1), accounts that trade security futures products must be approved in writing for that activity by the designated security futures principal. The Member must adopt and enforce specific written procedures regarding the approval process that include at least the following:

                  • Specific criteria and standards to be used in evaluating the suitability of a customer to engage in security futures transactions;

                  • Specific procedures for approving accounts to engage in security futures transactions, including requiring written approval by a designated security futures principal;

                  • A requirement that the designated security futures principal explain, in writing, why he or she has approved an account that does not meet the specific criteria and standards set forth in the procedures; and

                  • Specific financial requirements for initial approval and maintenance of customer accounts that engage in security futures transactions.

                  Compliance with Securities Laws

                  Compliance Rule 2-37(b) provides that Members must establish, maintain, and enforce written procedures reasonably designed to achieve compliance with applicable securities laws, including Sections 9(a), 9(b), and 10(b) of the Exchange Act and any applicable regulation thereunder. Again, these procedures must be approved, in writing, by a designated security futures principal.

                  Use and Disclosure of the Member's Name

                  Members must have supervisory procedures reasonably designed to ensure that the public understands who they are doing business with. It is conduct inconsistent with just and equitable principles of trade, and therefore a violation of NFA Compliance Rule 2-4, for Members and Associates to use misleading names or to fail to disclose their affiliation when dealing with the public. Similarly, Members and their Associates may not refer to another entity or individual in any manner that implies an affiliation that does not exist. Furthermore, CFTC Regulation 166.4 requires branch offices to use the name of the firm for all purposes and to hold itself out to the public under that name, and Appendix A to Part 3 of the CFTC's rules states that a person's registration can be denied, revoked, or conditioned under Section 8a(3)(M) of the Commodity Exchange Act if the person uses a misleading name. Members are, however, allowed to use non-misleading "doing business as" names if those names are reported to NFA on Form 7-R or Form 3-R.

                  The use of misleading names, affiliations, and qualifications is a violation of Compliance Rule 2-29(a)(1) and (b)(1). For example, if reference is made to membership in any organization (e.g., NFA, SIPC, an exchange), it should be clear which entity belongs to that organization. Similarly, Members and Associates may not state or imply that any individual has any degree or designation that does not exist or is self-conferred, nor may they use bona fide degrees or designations in a misleading manner. Therefore, the Member's supervisory procedures should be reasonably designed to ensure that neither the Member nor its employees use misleading names, affiliations, or qualifications in connection with their security futures activities.

                  Supervision of Branch Offices and Guaranteed IBs

                  As with other futures activities, Members must supervise each branch office and guaranteed IB that solicits or accepts accounts or orders for or recommends or engages in transactions in security futures products. A designated security futures principal must approve, in writing, and enforce written procedures that include all of the review steps discussed in the interpretive notice entitled "Compliance Rule 2-9: Supervision of Branch Offices and Guaranteed IBs" (9019). The review must be conducted under the supervision of a designated security futures principal and must include annual (or more frequent) on-site reviews of each branch office and guaranteed IB that solicits or accepts accounts or orders for or recommends or engages in transactions in security futures products.

                  Hiring Employees and Entering Into Guarantee Agreements

                  An adequate program for supervision must include thorough screening procedures for prospective employees who will be involved in commodity futures activities. In regard to prospective employees who may be involved in activities regarding security futures products and who have been registered in the securities industry, this screening process must include a check of the Central Registration Depository (CRD) for any derogatory information on the employee and his or her employer.2 The screening does not have to be done by a designated security futures principal. The designated security futures principal must, however, regularly review hiring practices to ensure that the screening process is taking place and to otherwise ensure that qualified personnel are investigating the good character, business repute, qualifications, and experience of employees who may be involved in security futures activities. Furthermore, all relevant information must be considered in making the hiring decision and determining how much supervision the employee will require.

                  A Member must obtain and review a copy of the most recent Form 8-T or U-5 (including any amendments) filed by a new employee's most recent security or futures employer if the employee will be involved in registered activities regarding security futures products. The Member shall obtain the Form 8-T or U-5 (including any amendments) no later than sixty days after the individual files an application for registration as an associated person (AP) of the Member under the Commodity Exchange Act. A Member that does not obtain the information within 60 days has the burden of demonstrating that it has made a reasonable effort by attempting to obtain the information both from NFA and FINRA (through the CRD), as applicable, and from the employee. If the Form 8-T or U-5 includes any derogatory information, the employer shall take such action as it deems appropriate.

                  The procedures must also require the employee to provide a copy of the Form 8-T or U-5 (and any amendments) to the Member within two business days after the Member requests it or, if the former employer did not provide a copy of the Form 8-T or U-5 to the employee, the employee shall promptly request a copy from the former employer (or from NFA or FINRA if the former employer cannot or will not provide it), and must provide the Form 8-T or U-5 to the Member within two business days after receiving it. The procedures must also require the employee to promptly provide the Member with any subsequent amendments to the Form 8-T or U-5.3

                  Guarantor FCMs must also do a due diligence inquiry before entering into a guarantee agreement. If the IB may be involved in activities regarding security futures products, the prospective guarantor must check the CRD for any derogatory information on the IB, its principals, and its employees. Again, all relevant information must be considered when deciding whether to guarantee an IB and determining how much supervision a guaranteed IB will require.

                  Meetings with Associated Persons

                  Each employee registered as an associated person under the Commodity Exchange Act and engaging in security futures activities must participate, no less than once a year, in an individual interview or group meeting, conducted by persons designated by the Member, at which compliance matters relevant to the associated person's security futures activities are discussed. The interview or meeting may include other matters and may occur at a central or regional location or at the associated person's place of business.


                  1 This notice does not change the general supervisory responsibilities that Compliance Rule 2-9 imposes on other NFA Members.

                  2If the prospective employer does not have direct access to the CRD, it can obtain the information from the Financial Industry Regulatory Authority (FINRA) using FINRA's public disclosure program. FINRA's public disclosure program can be accessed through its web site at www.finra.org.

                  3It is conduct inconsistent with just and equitable principles of trade, and therefore a violation of Compliance Rule 2-4, for an Associate to violate written procedures that are required by NFA, the CFTC, or the SEC.


                  9043 - NFA COMPLIANCE RULE 2-29: USE OF PAST OR PROJECTED PERFORMANCE; DISCLOSING CONFLICTS OF INTEREST FOR SECURITY FUTURES PRODUCTS

                  (Board of Directors, August 21, 2001)
                   
                  INTERPRETIVE NOTICE

                  The Commodity Futures Modernization Act of 2000 (CFMA), which was signed into law on December 21, 2000, lifts the 18-year ban on single-stock futures and narrow-based security indices ("security futures products"). Unlike other futures contracts, however, the CFMA provides that security futures products are securities as well as futures. Therefore, under Section 15A(k) of the Securities Exchange Act of 1934 (Exchange Act), NFA is a national securities association (NSA) for the limited purpose of regulating the activities of Members who are registered as brokers or dealers in security futures products under Section 15(b)(11) of the Exchange Act (i.e., FCMs and IBs who "passport" in to broker-dealer registration because they limit their securities activities to security futures products).

                  NFA Compliance Rule 2-29 imposes high standards on Members' and Associates' communications with the public in connection with any of their futures activities. When regulating the securities futures activities of Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act, however, Section 15A(k)(2)(B) of the Exchange Act requires NFA to impose sales practice and promotional material requirements reasonably comparable to those of national securities associations registered under Section 15A(a) of the Exchange Act. In light of those requirements, this notice reiterates some of the requirements that apply to all products and describes some of the additional requirements imposed by new section (j) of Compliance Rule 2-29. Section (j) applies to the security futures activities of those Members who are registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates. Sections (a)-(i) apply to all Members.

                  The requirements described in this interpretation are in addition to — and do not in any way limit or amend — any other requirements imposed by NFA rules, including those discussed in other interpretations issued by the Board of Directors.

                  Use of Misleading Statements

                  NFA Compliance Rule 2-29(b)(1) prohibits the use of promotional material that is likely to deceive the public. Additionally, NFA Compliance Rule 2-29(b)(2) prohibits the use of promotional material which contains any material misstatement of fact or which the Member or Associate knows omits a fact which causes the material to be misleading. NFA has always considered the following items to be violations of these Rules:

                  • Promotional material that uses outdated information to support current claims;1

                  • Promotional material that makes claims regarding research or other facilities beyond those which the Member or Associate actually possesses or has reasonable capacity to provide.2

                  • Promotional material that makes any statement to the effect that any report, analysis, or other service will be furnished free or without any charge unless such report, analysis or other service actually is or will be furnished entirely free and without condition or obligation.3

                  Use of Past or Projected Performance

                  NFA Compliance Rule 2-29 places certain limitations on the use of past or projected performance in communications with the public. Some of those limitations — most of which apply to all futures contracts regardless of the underlying commodity — are discussed in this section.

                  Provided that the performance is representative of all reasonably comparable accounts, most promotional material may discuss past performance of actual or recommended transactions if it meets a number of standards.

                  • Performance must be presented in a balanced manner. (See NFA Compliance Rule 2-29(b)(2) and (b)(5).)

                  • The promotional material must disclose all relevant costs, including commissions and fees. (See NFA Compliance Rule 2-29(b)(2).)

                  • Any discussion of the past performance of recommended transactions must comply with NFA Compliance Rule 2-29(c).

                  • For security futures products, the promotional material must indicate the general market conditions during the period covered. (See NFA Compliance Rule 2-29(b)(1) and (2).)

                  • Performance information used by FCMs, IBs, and their Associates must include the date of each initial recommendation or transaction; the price at that date; and the date and price at the end of the period or when liquidation was suggested or effected, whichever was earlier. If a summary is used, it must be calculated in a manner consistent with CFTC Regulation 4.25(a)(7)(i)(F). (See NFA Compliance Rule 2-29(b)(2) and (5).)

                  • Performance information used by FCMs, IBs, and their Associates must also be current, meaning that it must cover at least the most recent 12-month period or must include the performance in its entirety if less than 12 months. The Member or Associate must disclose more than the last 12 months of performance if the last 12 months is not representative, and the Member or Associate may not include gaps or otherwise cherry-pick the periods for which it discloses performance. (See NFA Compliance Rule 2-29(b)(1) and (2).)

                  • The Member or Associate must keep records showing how it calculated the performance numbers used in the promotional material. These records must identify the trades and accounts that were used in calculating performance, describe how and why those transactions and accounts were selected, and demonstrate how the results are representative of all reasonably comparable accounts. (See NFA Compliance Rule 2-29(f).)

                  • A person who is authorized to approve the promotional material must determine that the performance information is accurate and is presented in a manner that is not misleading. (See NFA Compliance Rules 2-9(a) and 2-29(e).)

                  Promotional material that discusses projected performance must also meet a number of standards.

                  • The promotional material must disclose, and the projected performance must be adjusted for, all relevant costs, including commissions and fees. (See NFA Compliance Rule 2-29(b)(2).)

                  • The projected performance must have a reasonable basis in fact. (See NFA Compliance Rule 2-29(d).)

                  • All material assumptions made in projecting performance must be clearly identified. (See NFA Compliance Rule 2-29(b)(2).)

                  • The risks must be discussed and balanced with the discussion of projected profits. (See NFA Compliance Rule 2-29(b)(3).)

                  Annual rates of return may not be used in any promotional material unless they are based on 12 consecutive months of actual performance, and they must be calculated in a manner consistent with CFTC Regulation 4.25(a)(7)(i)(F). (See NFA Compliance Rule 2-29(b)(5).) Furthermore, the promotional material must state that past results are not necessarily indicative of future results. (See NFA Compliance Rule 2-29(b)(4).)

                  NFA Compliance Rule 2-29(j) imposes additional restrictions on promotional material of Members registered as broker-dealers under Section 15(b)(11) of the Exchange Act and their Associates if the promotional material specifically refers to security futures products. Where the promotional material is accompanied or preceded by the disclosure statement for security futures products, references to past recommendations must include all of the information described in Compliance Rule 2-29(j)(9), and references to current recommendations must include instructions on how to obtain that information. However, promotional material for these products may not contain any discussion of past or projected performance unless accompanied or preceded by the disclosure statement for security futures products. This means that most forms of mass media advertising