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Compliance Rules

Part 3 - Compliance Procedures


[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).