Interpretive Notices

Effective October 15, 2024, the new interpretive notice below will be effective:

9082 - NFA COMPLIANCE RULE 2-52: REQUIREMENTS IN CONNECTION WITH NFA'S MEMBER QUESTIONNAIRE

(Board of Directors, February 15, 2024. Effective October 15, 2024.)

INTERPRETIVE NOTICE

To maintain NFA membership, each NFA Member is required to complete and submit NFA's Member Questionnaire (Questionnaire and f/k/a NFA's Annual Questionnaire) to NFA on at least an annual basis. The Questionnaire provides staff with critical and material information regarding a Member's activities and operations. Further, the Questionnaire's information serves as a continuous source of data for NFA's risk monitoring systems and is the first and the central resource for staff when reviewing or performing our Member oversight responsibilities. Below is further information on a Member's obligations with respect to its ongoing filing requirement.

The Questionnaire contains a General Information section that all Members are required to complete at least annually. This section allows NFA to collect important information, which includes among other items whether a Member: engages in commodity interest activities; currently solicits customers to trade commodity interests; has direct electronic access to a designated contract market or utilizes trading algorithms; has other U.S. or non-U.S. regulators; is a member of a DCM, swap execution facility or designated clearing organization; or engages in activities relating to digital assets or micro-contract products. The General Information section also requires Members to provide key information about their disaster recovery or emergency contacts.

In addition to completing the Questionnaire's General Information section, FCM Members firms for which NFA is the designated self-regulatory organization (DSRO)¹ and all other Members must complete separate Questionnaire sections relating to their respective business operations. These separate Questionnaire sections allow NFA to collect more detailed information about a Member firm's activities relevant to its membership category or categories.

Information About When to File the Questionnaire

As described above, each NFA Member is required to complete and submit NFA's Member Questionnaire (Questionnaire) to NFA on at least an annual basis. Prior to a firm's anniversary date of being approved as an NFA Member, NFA will notify the Member that it must complete and submit to NFA the Questionnaire by a specified date. As provided in NFA Bylaw 301(h), a Member firm's failure to complete and submit the Questionnaire within the required time period will be deemed by NFA as a Member's request to withdraw from NFA membership.

The majority of NFA Members will only need to annually submit the Questionnaire. However, in the situations described below, certain Members will need to complete and submit the Questionnaire more frequently.

Firms With a Semi-Annual Filing Requirement

NFA Compliance Rule 2-52(a) requires a Member to submit the Questionnaire on a more frequent basis if required by NFA. Specifically, the Questionnaire's General Information section asks several "yes/no" questions about a Member's involvement in activities relating to commodity interest products. For those Members that answer "no" to all these questions, NFA has determined that they are not conducting commodity interest business and, therefore, are Inactive.² Further, to clearly indicate to the public that a firm is not conducting any commodity interest business, NFA has posted a banner on the firm's webpage within NFA's BASIC system that prominently indicates the firm is Inactive. Given the potential significance of this banner, a Member should promptly update its Questionnaire if it begins engaging in business activities relating to commodity interest products.

Moreover, to provide NFA with current and timely insight (in case the firm is remiss in updating the Questionnaire upon becoming active) to changes in a firm's business activities and ensure that BASIC information is complete and current, NFA is requiring an Inactive firm to semi-annually complete and submit the Questionnaire. To effectuate this semi-annual filing obligation, if a Member previously answered "no" to the General Information section's questions relating to its involvement in commodity interest activities, approximately six months after a firm's anniversary date, NFA will notify and request that the Member complete appropriate sections³ of the Questionnaire, which must be submitted by a specified date. Failure to complete and submit the required sections of the Questionnaire within the required time frame will be deemed a request to withdraw.

Material Changes—Obligation to Update

Given the importance of the information provided by Members in submitting the Questionnaire, it is essential that any material information be complete, accurate and up to date. A material change in a Member's business operations may alter a firm's risk profile and is extremely important for NFA to learn about to perform its oversight responsibilities.

Therefore, NFA Compliance Rule 2-52(b) requires a Member to promptly update applicable provisions in the Member Questionnaire to disclose material changes to the Member's business operations, which make the information previously submitted in the Questionnaire inaccurate or incomplete. Consistent with NFA's regulatory approach, NFA does not intend to prescribe all of the events that may qualify as material and, therefore, require a Member to update the Questionnaire. Instead, NFA recognizes that each Member is in the best position to determine what constitutes a material change in its operations based on the type, size and complexity of the Member's business and will rely upon its Members to make these individual determinations and update the Questionnaire accordingly.

However, NFA believes a Member should update its Questionnaire if certain changes occur. Specifically, engaging or disengaging in activities relating to: commodity interest products, micro-contracts, retail forex or digital assets, algorithmic trading activities, or cloud computing; a significant increase or decrease in customer accounts; an IB's revenue increases to exceed the designated threshold that would require it to comply with Commodity Futures Trading Commission Regulation 1.35(a)(1)(iii);⁴ or, if a CPO has a pool that has just commenced operations.

Information About Who Files the Questionnaire

Given the importance of the information contained in the Questionnaire to NFA fulfilling its regulatory oversight responsibilities, the individual responsible for reviewing, signing and submitting the Questionnaire and all updates should be sufficiently knowledgeable about a Member firm's ongoing business operations. Therefore, Compliance Rule 2-52(c) requires that for all Member categories other than SDs and MSPs (provided they are not also a Member in another NFA Membership category) an individual who is a registered associated person (AP) and a listed principal of the Member reviews, signs and submits the Questionnaire and all updates. Since SDs and MSPs do not have registered APs, Compliance Rule 2-52(d) requires that a principal of the SD or MSP reviews, signs and submits the Questionnaire and all updates. The SD or MSP principal should possess the appropriate level of experience and skills to determine the completeness of the information submitted.

The Questionnaire's submitter is required to complete an attestation certifying that the answers and information provided are materially true, complete and accurate.

¹ NFA may in appropriate circumstances direct a non-NFA DSRO FCM to complete the Questionnaire's General Information section and FCM business operations component.

² NFA does not have a formal Inactive membership status.

³ NFA will require the Member to complete the General Information section's questions about the firm's commodity interest business. If the firm changes an answer to "yes" to indicate that it is conducting commodity interest business, the firm will then be required to complete the other applicable questions in the Questionnaire, including those relating to its business operations.

⁴ CFTC Regulation 1.35(a)(1)(iii) requires IBs that have generated over the preceding three years more than $5 million in aggregate gross revenues from their activities as an IB to keep all written and oral communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest whether transmitted by telephone, voicemail, instant messaging, chat rooms, electronic mail, mobile device or other digital or electronic media.