As your industry advocate, the NIBA provides many services which help your business stay in compliance with NFA regulations. "Ask the NFA," is the way you can ask questions about those regulations and compliance requirements without having to call NFA directly.
Just email us at nfacomments@theniba.com and we will get the answers for you. Please keep in mind the purpose of this contact is to keep the lines of communication between NFA and NIBA members open, not to fix any specific individual concerns.
This month's questions were selected from those submitted by NIBA members over the last two months. The answers were supplied by NFA staff.
I am an IB and have an AP who did their AML annual training late by a couple of weeks. Should I notify the NFA now or wait until we are audited?
There is no specific self reporting requirement to NFA relating to late AML annual training. In examining IBs, NFA will request that the firm provide an explanation for the late training (e.g. medical reason) and, if reasonable, ensure that the training has been completed. To the extent the explanation for the late training does not appear reasonable, NFA may issue the firm a staff letter following the examination and if a repeat violation is found in the future then the firm may be subject to disciplinary action. NFA encourages firms to document why a person did not complete AML training in a timely manner and make sure training is completed as soon as possible.
I am an IB and use a managed futures portal which lists performance from a number of different CTA programs. What are my regulatory responsibilities for this material?
There are many considerations when using this type of material either on your website or in any other medium. Due diligence is going to be paramount. If you have the material on your website, “link" to the material, or create a portal on your website, then the material is considered promotional material and you need to ensure that you comply with all rules and regulations. Importantly, IBs under certain circumstances may need to verify the performance information and should ensure that the material is not misleading. Please refer to NFA Compliance Rule 2-29, its various Interpretive Notices, and NFA Compliance Rule 2-9's Interpretive Notice relating to the use of web sites.
Does NFA look at the commission to equity ratio in customer accounts during examinations. If so, what is considered in line with expectations?
Yes, NFA reviews commission to equity ratios during examinations. NFA does not have an established ratio that may or may not be acceptable. Rather, NFA views several factors in evaluating whether a ratio raises red flags and may be unacceptable, including the nature of customer, trading, service provided, and whether the account is discretionary or non discretionary among others.