Financial Regulation and Compliance: How to Manage Competing and Overlapping Regulatory Oversight, + Website

CHAPTER 10 How to Defend NFA Enforcement Actions

The NFA, as the SRO for the futures industry, conducts much of its oversight in the form of periodic on-site examinations, as discussed in greater length in Chapter 6. The NFA also establishes and enforces rules and standards for customer protection, provides an arbitration forum for futures- and forex-related disputes, and conducts screening to determine fitness to become or remain an NFA member.

10.1 NFA DISCIPLINARY ACTIONS

In addition, the NFA Rules provide for two types of disciplinary actions – a complaint and a Member and/or Associate Responsibility Action (“MRA/ARA”). According to Ronald Hirst, the Associate General Counsel/Enforcement Coordinator for the NFA, a complaint is the most common type of disciplinary action taken at the NFA and is issued by the NFA's Business Conduct Committee (“BCC”)¹ if they find reason to believe that an NFA requirement is being, has been, or is about to be violated and that the matter should be adjudicated.² An MRA/ARA may be issued when the President of the NFA, with the concurrence of the NFA's Board of Directors or Executive Committee, has reason to believe immediate action is necessary to protect the commodity futures markets, customers, or other NFA members or associates. Although not considered a formal disciplinary action, Part 3 of the NFA's Compliance Rules also authorizes the BCC to issue – or to authorize the Compliance Department to issue – a warning letter if, after completing ...