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Compliance Rules

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


[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.