Regulations Flashcards
NFA
1976 -Self regulatory regulates all persons conducting futures business with the public.
CFTC
Commodity Futures Trading Commission Act of 1974
independent agency of U.S government. 5 members 5 year term.
CFTC REAUTHORIZATION ACT
2008 enforce the Dodd-frank act - must register with the CFTC as “RFEDS”- retail foreign exchange dealers if you did retail forex transactions business. Registered FCMS are permitted to engage in forex without registering as RFEDS. AP must pass both Series 3 & 34.
Who regulates stock index futures & stock index futures options?
CFTC (FUTURES)
Front running
Putting orders ahead of customers
Customer protection procedure
FCM must separate customer assets from the firms & firm cannot use customer funds for business or own trades
Future exchanges
Must b licensed with CFTC. CFTC designates particular exchanges as contract markets for specific commodities
NFA Form 8-R (know your customer type of thing)
10yr Employment history 5yr residential 4 AP
Reporting limits
Max net number of contracts one trader or customer can hold on same side of a comd without having to file daily report(all long & short positions options also)
Special accounts
Weekly reports of accounts exceeding reporting levels
Position Limits
Bona Fide hedgers dont have position limits only to speculators
How many days does a bona hedger have to notify CFTC of intent exceed position limit?
At least 30days b4 establishing
commissions became negotiable?
March 1978
Cftc reparations program
Thru a ‘Alj’ preceding of 30k> wide vary if sanctions suspending! revoking !civil penalties & deny trading privileged all exchanges.
Inexpensive way to resolve disputes between future & options customers & registered trading professionals 2yr statue of limitation
Voluntary summery or formal
Decisions by ALJ appealed by?
Commission and then US court of Appeals
Criminal proceeding penalty?
Us district court felony punishable by fines or 5yrs prison or both . misdemeanor punishable up to 1yr prison.
Statue of limitation
Complaints must be filled within 2yrs of date violation occurred or 2yrs the offended party should have known about violation.
Who is required to be NFA members
FCM IB CPO CTA AP
ALJ
Administrative law judge
Ap dual registration
Yes long as NFA is notified each member must certify they know of each other and supervise the AP
Appealed denial of registration to NFA ?
Must b filed within 30 days to the CFTC
Bucket orders
Hold but not execute
Churning
Excessive transactions for them commissions boy
Members & Ap share customers profits& loss?
Yea w written consent
Can promo say “Endorsed by NFA”
Nope
Can you terminate a membership under investigation
Nope
Can you do business with suspended members
Nope
Discretionary account
Must b in writing, grant power of attorney, Ap must have 2yrs experience as a RcR or b a CTA. Firms must supervise INTENSELY must b approved by a supervisor after order is FILLED. MUST REGULARLY review activity.MUST KEEP RECORD OF REVIEWS.
RcR
Registered commodities representative
Account transfer
FCM has 2days to confirm positions and 3days to transfer customers assets. 5days TOTAL AFTER WRITTEN REQUEST.
3rd party control
Not customer nor firm but a family member or some1 else makes trades for customer. EXTRA CARE AND ADDITIONAL RECORDS REQUIRED . WRITTEN PROOF & confirm disclosure documents received
NFA Promo Rule 2-29 Apply to
Sales literature ,seminars, advertising newspapers radio tv,newsletters,sales scripts ,internet material , performance charts & graphs
Approval of promo material?
Supervisory approval other than the employee who developed it. Main office must approve b4 branch& below locations distribute it.
Copy’s of promo material maintained?
3yrs from date of use. May file copy’s with the NFA
Timetable for promo material requirements
Each member keep file of promotional item and copy of supervisory review & approval .Readily assessible 3yrs from last used date & maintained total of 5yrs
Review of promo material
NFA does require to submit unless disciplinary action but will review takes up 2 21days.
2-29 fairness
Members provide customers with info they need writes of promo use standards and honesty as if it was you seeking investments
When do you use Disclaimers (promo)
Using hypothetical results, less than 1 yr exp trading customer accounts ,1year or less exp allocating assets
Responsibility of promo material
The member. The Ap prepare the AP & member
Truth & balance OF pROMO
Promo material Must b accurate probability of profit must have equal statement covering risk of loss
TV & radio promo
If you “pay” it’s promo
Infomercials pROMO
Popular form of promo must have disclaimer at beginning & end of show
Misleading words in Promo
Proven & unlimited shouldn’t b used
Options promo
Must disclose limited risk on long positions only must disclose can lose entire premium and uncover calls unlimited risk
Know your customer
Annual income, networth, investment exp & investment goals
Risk disclosure
Must b signed b4 trading. Explain risk of trading futures and potential loss of all and addition funds. They understand . Must b kept in customers files.
Account statements time
Monthly statements unless no trades or open positions then quarterly
Future option disclosure
Must mention loss of entire premium. Seller unlimited risk, separate option document or generic disclosure document with both
Confirmations time
Written confirms of trades no later than next business day
Firm Records
Copy of monthly statements, daily record,property/securities deposited, account card,