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 the NFA and NIBA members.
This month’s questions were selected from those submitted by NIBA members. The answers were supplied by NFA staff.
Are there any scenarios when a CTA might be required to also register as an IB?
An introducing broker (IB) is an individual or organization that solicits or accepts orders to buy or sell futures contracts, options on futures, retail off-exchange forex contracts or swaps, but does not accept money or other assets from customers to support such orders. With few exceptions, if a commodity trading advisor (CTA) solicits or accepts orders, it must register as an IB. Visit NFA's and the CFTC's websites for additional information regarding registration requirements.
I read in a previous column that individuals must be registered to solicit or accept customer orders. However when I was going through my self exam I saw the following which seems to provide different guidance: "Does the Member prohibit individuals who are not registered as associated persons ("AP") from soliciting or accepting customer orders (except in a clerical capacity) or from supervising those individuals? (CEA Section 4k)" Can you please clarify what the rule is regarding this.
Individuals not registered as associated persons (AP) may act in a clerical capacity but are prohibited from engaging in any activity that would require them to be registered as an AP, such as soliciting or accepting customer orders, offering trade advice, or supervising those who engage in these activities. Refer to CFTC Regulation 3.12 for information on registration requirements for APs.
I keep seeing systems being offered and would like to explore offering them myself but am unaware of the regulations bc so many of these providers are not registered. Can you point me to some rules or regs to reference so I can gain comfort in offering these products while still being compliance.
NFA's Interpretive Notice 9055 is designed to provide guidance as to the circumstances that may give rise to liability on the part of a Member, under NFA Bylaw 1101, for providing execution services to users of computerized trading systems developed by non-Member third-party system developers. It also discusses the factors that may cause a Member to be responsible, under NFA Compliance Rule 2-29, for promotional material that promotes these trading systems and the Member's supervisory obligations under NFA Compliance Rule 2-9.
I am a new CTA, but personally have more of an IB background. What are my AML and policy/procedure requirements for a CTA and how do they differ from an IB?
NFA has a tremendous amount of educational resources to help all Members understand their regulatory obligations. For a commodity trading advisor (CTA), NFA has a Disclosure Document Guide and a general Regulatory Requirements Guide. Find more CTA resources by visiting the Education and Training section of NFA's website. If the educational resources on NFA's website do not adequately address a question, Members are encouraged to contact NFA's Information Center at 312-781-1410 or 800-621-3570 to talk directly with an NFA employee who can provide further assistance.
