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. The answers were supplied by NFA staff.
My Introducing Broker is approaching the $5 million aggregate gross revenue threshold that would require my firm to tape record oral communications as required by CFTC Regulation 1.35(a). Has there been any discussion on changing this regulation?
When the CFTC amended Regulation 1.35 in 2012, it determined to exclude IBs that had generated $5 million or less in aggregate gross revenue from its IB operations over the preceding 3 years from the requirement to record oral communications. Many contend the threshold was set to low.
On November 14, 2014, the CFTC proposed amendments to Regulation 1.35 that consider changes to a number of requirements within the regulation. A copy of the CFTC's notice can be found here. The CFTC's proposal did not expressly propose changes to the $5 million aggregate gross revenue threshold, NFA elected to comment on that aspect of the regulation nonetheless. In its January 13, 2015 comment letter, NFA questioned whether this revenue threshold was appropriate given the rule's regulatory objective and recommended that the CFTC carefully consider in the near future whether any adjustments can be made to increase this revenue threshold. A copy of NFA's comment letter can be found here.
Approval of the proposed changes to Regulation 1.35 is still pending.
NFA's Information Center is a valuable resource for me and a good source of information about registration matters, rules and regulations. To what extent is an answer provided by NFA's Information Center or Compliance Department staff over the phone a "final answer?" For example, what if I'm provided a differing answer from NFA staff over the phone than from what I may be given during an examination? I think getting advice from NFA on regulatory matters has helped me but I want to make sure what I'm told is consistent.
NFA Information Center and Compliance Department staff does their best to provide accurate responses to questions and scenarios posed over the phone by the general public and Members. However, answers to scenarios or hypothetical situations are only as precise as the quality and quantity of facts communicated by the caller.
Examiners conducting examinations have the advantage of considering questions with a wider view of the scenario in the context of the Member's overall operations. When considering an issue with the benefit of understanding the wider context and the entirety of a firm's operations, it may change the answer originally expressed by Information Center or Compliance Department staff.
Are any rule or regulation changes being contemplated to address problems that occurred in the retail FX space when the Swiss government removed the cap on the exchange rate between the Franc and the Euro in January 2015?
Extreme market conditions that occurred when the Swiss government removed the cap on exchange rates between the Franc and Euro caused significant capital deficiency issues and other problems in the retail FX space. As a result, NFA and CFTC staff is in active conversations to consider what enhancements should be made in the areas of FDM risk management best practices, changes to FDM capital requirements and enhanced requirements for public disclosures by FDMs.