National Futures Association (NFA)
The National Futures Association is a self-regulatory organization for the U.S. futures industry. The NFA regulates firms that engage in trading futures contracts, commodity options, and other products subject to the Commodity Exchange Act (CEA).
The U.S. Commodity Futures Trading Commission (CFTC) recognizes the NFA as a registered futures association. This member-driven organization provides several services to its members, including educational resources, dispute resolution, and compliance assistance.
The History of the National Futures Association
The National Futures Association was founded in 1982 as the National Commodity Futures Association, a non-profit organization under section 17 of the Commodity Exchange Act. In 1988, the organization’s name changed to the National Futures Association. The NFA has its headquarters in Chicago, Illinois, and has offices in New York City and Washington, D.C.
The Mission of the National Futures Association
The National Futures Association is committed to protecting investors and ensuring the integrity of the futures markets. It accomplishes this through a commitment to core values of:
The NFA works hard to protect investors and ensure the integrity of products sold in the derivatives market. It also aims to create a diverse and inclusive environment and believes the uniqueness of each contributing member enriches its resources.
Entities Governed by the National Futures Association
Any firm or individual that intends to do business as a futures commission merchant, introducing broker, commodity pool operator, commodity trading advisor, or retail foreign exchange dealer must register with the NFA. This list includes firms headquartered outside of the United States but doing business with U.S. customers. To become a member of the NFA, a firm must meet specific financial requirements and pass a background check on its principals and employees.
The Benefits of Registering With the National Futures Association
Registering with the NFA provides credibility for the member organizations involved. Finance-savvy investors will always use the NFA’s BASIC tool and take other steps to ensure the integrity of the persons they work with in the derivatives market. Consequently, entities that register with the NFA gain the following advantages:
- The right to conduct business in the U.S. derivatives markets
- The ability to protect customers by meeting high standards for financial responsibility
- The opportunity to tap into a broad range of educational resources
- The ability to receive assistance with compliance-related issues
Consumers and investors also benefit from the rules and regulations NFA members must follow. Here are some examples of those rules:
- Maintaining minimum net capital levels
- Filing periodic financial reports
- Restrictions on trading for customers’ accounts
- Submitting to regular audits
National Futures Association Enforcement and Registration Actions
The NFA can take enforcement and registration actions as part of its duties. The organization takes these actions when individuals or firms violate rules or regulations, engage in fraud, or fail to meet customer obligations.
NFA is dedicated to creating a level playing field for all participants in the derivatives markets. It believes that all firms and individuals should receive fair, equal, and respectful treatment. Additionally, most people agree that it values customer protection above all else.
These are some of the most recent enforcement actions it has taken against organizations:
- $10,000 fine against an energy company for violations related to the anti-money laundering program and the supervision of employees
- $40,000 fine against a petroleum company for violations related to office recordkeeping and the supervision of employees
- $250,000 fine against a brokerage company for violations related to Forex price adjustments and the supervision of employees
- $35,000 fine against a financial consultancy for violations related to the registration of APS as associates, office recordkeeping, and the supervision of employees
- $2,500,000 fine against a major bank for violations related to swapping dealers and participants
- Permanent barring from membership for Edeal Market LLC due to several violations related to registration, failure to cooperate, acting in a capacity not registered for, promotions, and employee supervision
Free BASIC Assessment for Due Diligence
The NFA offers a free BASIC assessment to help firms with their due diligence. This is an online tool that potential customers can use to research the background of member firms and their employees. This tool improves transparency and makes it easier for investors and businesses to go into each transaction with the data they need to make informed decisions.
How Message Capturing and Archiving Helps With NFA Compliance
Compliance with NFA rules and regulations is essential for all member firms. One way to help ensure compliance is to capture and archive all business communications, including instant text messages. You can then use this data to accomplish the following:
- Investigate potential rule violations
- Resolve customer complaints
- Support marketing claims
- Provide information during audits
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