NFA submits amendments to Compliance Rule 2- 30 regarding customer information and risk disclosure
NFA and CFTC are working to ensure a much more strict compliance is enacted upon traders. As a part of
NFA and CFTC are working to ensure a much more strict compliance is enacted upon traders. As a part of this process NFA would like to make sure that more information is collected about traders and that it is updated frequently.
While not in particularly interesting (just like any regulatory document) this is still something worth reading – especially for US brokers, IBs and CTAs.
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(a) Each Member or Associate shall, in accordance with the provisions of this Rule, obtain information from all individual customers and any other customers who are not eligible contract participants (as defined in Section 1(a)(12) of the Act) and provide such customers with disclosure of the risks of futures trading.
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(b) The Member or Associate shall exercise due diligence to obtain the information and shall provide the risk disclosure at or before the time a customer first opens a futures trading account to be carried or introduced by the Member, or first authorizes the Member to direct trading in a futures account for the customer.
A Member registered as a broker or dealer under Section 15(b)(11) of the Exchange Act shall provide a copy of the disclosure statement for security futures products at or before the time the Member approves the account to trade security futures products. For an active customer who is an individual, the FCM Member carrying the customer account shall contact the customer, at least annually, to verify that the information obtained from that customer under Section (c) of this Rule remains materially accurate, and provide the customer with an opportunity to correct and complete the information.
Whenever the customer notifies the FCM Member carrying the customer’s account of any material changes to the information, a determination must be made as to whether additional risk disclosure is required to be provided to the customer based on the changed information. If another FCM or IB introduces the customer’s account on a fully disclosed basis or a CTA directs trading in the account, then the carrying FCM must notify that Member of the changes to the customer’s information. The Member or Associate who currently solicits and communicates with the customer is responsible for determining if additional risk disclosure is required to be provided based on the changed information. In some cases, this may be the Member introducing or controlling the account; in other cases, it may be the carrying FCM.