NFA Releases Annual Report

The NFA is the self-regulatory organization for the futures industry in the US. The National Futures Association (NFA) said it had largely met goals it set a year ago in a new 2019 Review annual report.

Here is a further explanation, “The Commodity Futures Trading Commission has designated National Futures Association (the Association) as a registered futures association. Among the Association’s activities are qualification screening and registration, financial and trade practice surveillance, enforcement of customer protection rules and uniform business standards, arbitration of disputes and educational activities. The Association is primarily financed through the payment of assessments and dues by its members and registration fees by registrants.”

The NFA recently put out its 2019 annual review and in it NFA’s Chairman of the Board Michael Dawley said, “Last year, I previewed several coming attractions for Fiscal Year 2019 (July 1, 2018-June 30, 2019). Many of these initiatives were identified by NFA’s Executive Committee and senior staff during its last long-range planning meeting. This forward-looking meeting, which is held every few years, covers issues that could have a significant impact on NFA and our Members. In this year’s Annual Review, I am pleased to report that we completed all the work we set out to do related to these initiatives. In the next several pages, you will read brief summaries covering Swaps Proficiency Requirements, our redesigned BASIC system, and CPO internal controls, among other things.”

Along with being a chair of the NFA, Dawley is a former executive at Goldman Sachs who currently is president of Bluefin Partners LLC, a privately held company incorporated in New York, according to his profile at the Institute for Financial Markets.

Swaps Proficiency Requirements

The NFA said that in June 2018, it announced an initiative to develop swap proficiency requirements. These requirements would apply to Futures Commission Merchants (FCM), introducing brokers (IB), Commodity Pool Operators (CPO), and to Commodity Trading Advisors (CTA).

“These Requirements will be in the form of an online learning program that consists of a series of modules, each with a training and testing component,” the review stated.

The review provided this update, “During this fiscal year, NFA worked closely with NFA’s SPRAC to develop all aspects of the Requirements’ framework. The program will include two separate tracks based primarily on whether an individual is associated with an SD or an intermediary firm. Other tasks completed this year included identifying the specific topics to be covered in each track, finalizing the content for all modules, transforming the content into e-learning modules, drafting test questions, designing and implementing a learning management system, and adopting rules and an Interpretive Notice to implement these Requirements.

“In addition to working closely with the SPRAC, NFA also worked closely on these Requirements with the CFTC, NFA’s Board, NFA Members and relevant trade associations.

“NFA’s Swaps Proficiency Requirements will launch in late January 2020 with a Compliance Date of January 31, 2021.”


Basic is, “a free tool that NFA members can use to research the background of derivative industry professionals,” according to NFA’s website.

Of the progress made, Dawley stated this in the review, “Member involvement was also instrumental in the debut of NFA’s enhanced BASIC system. To identify how to improve this system, staff collected valuable data from BASIC users, including investors and NFA Members, regarding access, data used and functionality. Staff also obtained FCM Board Member feedback on the proposed graphical display of FCM financial information. Member input and feedback throughout the BASIC redesign contributed to a successful rebuild.”

The NFA explained further about BASIC in the review, “NFA Members, other regulators, and the investing public rely on BASIC as the primary source for important registration and disciplinary background information on firms and professionals in the derivatives industry. On average, there are nearly 200,000 BASIC searches performed each month. NFA launched its updated BASIC system in August 2019. The rebuild incorporates mobile responsiveness, a more robust search, improved navigation and a modern user interface. The enhanced BASIC system also provides a new visual representation of selected data from FCM Financial Reports that was previously available in tabular format only.”

CPO Internal Controls

CPO refers to Commodity Pool Operator and the NFA noted in the review, “NFA Compliance Rules require Members to diligently supervise all aspects of their derivatives activities. Similar to FCMs, CPO Members have control over customer funds and must have a framework that deters errors and fraudulent activity, produces accurate financial reports, and ensures compliance with all regulatory requirements. An adequate internal controls system is the foundation for building this framework. Therefore, NFA adopted an Interpretive Notice requiring each CPO Member to implement an internal controls system. The Notice provides CPO Members with guidance on designing and implementing an adequate internal controls system and the minimum components that must be included.”

NFA noted further, “To assist CPO Members in developing, implementing and maintaining their internal controls frameworks, NFA added questions to the CPO section of the Self-Examination Questionnaire and held a webinar. Download the Self-Examination Questionnaire and view the webinar by visiting the Member Education & Resources page of NFA’s website.”