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Interpretive Notices


(Board of Directors, March 28, 2000; revised January 1, 2020)


NFA Compliance Rule 2-29 governs communications between FCM, IB, CPO and CTA Members and the public. Among other things, the rule prohibits the use of promotional material that 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.

NFA's Board of Directors ("Board") previously issued guidance establishing specific requirements for certain radio and television advertisements. Emerging technologies and innovations, including internet broadcasts, various forms of social media and downloadable audio or video content, have led to a wide range of audio and video forums beyond traditional radio and television that allow Members to reach a broad and, in some cases, targeted audience. Since these technologies may also be used to disseminate deceptive or misleading content, the Board has, as described below, amended Compliance Rule 2-29(h) to apply to all promotional materials and public advertisements that use audio or video content.

Although the content and method of delivery may vary, many problematic audio and video advertisements have a consistent theme, which is that customers are likely to make substantial profits by following the sponsoring firm's recommendations. These advertisements hurt both customers naïve enough to believe the claims and the reputation of the industry. The Board is especially concerned where FCM, IB, CPO or CTA Members are making trade recommendations or touting the profitability of past or future trading performance. Some FCM, IB, CPO or CTA Members have taken advantage of audio and video forums to distribute advertisements that are misleading or deceptive. For example, FCM, IB, CPO or CTA Members have used audio or video advertisements that have intentionally omitted required risk disclosures and material information required to put the content of the advertisement in the proper context.

NFA Compliance Rule 2-29(h) requires any FCM, IB, CPO or CTA Member firm using or directly benefiting from any promotional material or public advertisement that uses audio or video content to make any specific trading recommendation or refer to or describe 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 preclude NFA from raising compliance issues with the content of the promotional material or instituting a disciplinary action if misstatements, omissions of material fact or other violations of NFA rules are subsequently identified.

The Board has directed staff to be particularly vigilant in reviewing audio and video 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 practices outlined in Interpretive Notice 9033 – NFA Compliance Rule 2-29: Deceptive Advertising, which describes a variety of problematic practices.

It is important to note that the list of deceptive advertising techniques described in NFA's Interpretive Notice 9033 – NFA Compliance Rule 2-29: Deceptive Advertising, is not all inclusive. Any practice that presents a distorted and misleading view of the likelihood of customers earning dramatic profits by investing with the Member, 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 audio and video advertisements 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 or subscribe online 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 advertisement. Members cannot 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 commodity interest 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 commodity interests, 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 advertisement utilized by the lead provider complies with NFA Compliance Rule 2-29. If the advertisement does not comply with the requirement outlined by this rule, then the Member is not permitted to solicit any customer with the leads purchased from that provider.