NFA Announces Amendments to Member Questionnaire Requirements Effective October 15, 2024
R Tamara de Silva
The National Futures Association (NFA), the self-regulatory organization (SRO) for the U.S. derivatives market, has announced amendments to its Member Questionnaire (formerly called the Annual Questionnaire) which are set to take effect on October 15, 2024. These changes, as outlined in NFA Compliance Rule 2-52 and related Interpretive Notice 9082 introduce new requirements for how NFA members must manage their compliance obligations, particularly concerning the frequency of updates and the authority required for submitting the Member Questionnaire.
Overview of the Amendments
The NFA’s Notice to Members I-24-14 highlights these changes announced on May 20, 2024 in NFA Notice I-24-10.
The Member Questionnaire, previously known as the Annual Questionnaire, serves as a key tool for the NFA to collect important information about its members' operations. The new rules mandate that all NFA members update their Questionnaire at least annually. In addition, members will need to make more frequent updates under certain conditions, such as when there are material changes in their business operations.
One of the most notable amendments requires that the Member Questionnaire must now be reviewed, signed, and submitted by an individual who is both listed as a principal and registered as an associated person (AP) of the member firm. This requirement applies to all NFA members except those registered solely as swap dealers, who must have the Questionnaire reviewed, signed, and submitted by a principal.
New Filing Requirements
The amendments also establish a new semi-annual filing requirement for members who are not currently engaged in commodity interest activities. These members, designated as "Inactive," must update specific sections of the Questionnaire twice a year. The NFA will prominently display an "Inactive" status on the member's NFA BASIC profile, providing additional transparency to the public regarding the member's level of activity in the commodity interest market.
For members actively engaged in commodity interest activities, the Questionnaire must continue to be updated annually. However, any material changes in a member’s business operations—such as significant shifts in business activities, customer accounts, or the launch of a new trading pool—will require prompt updates to ensure the accuracy of the information provided to the NFA.
Compliance and Implications
The NFA has made it clear that failing to submit the Member Questionnaire by the specified deadline will be interpreted as a request to withdraw from NFA membership. This underscores the importance of timely and accurate submissions, as non-compliance could result in the loss of NFA membership and the ability to operate within the derivatives market.
To comply with these new requirements, NFA members should determine which personnel who are both listed as principals and APs will be responsible for reviewing and submitting the Questionnaire. Additionally, firms should ensure these individuals are familiar with the NFA’s Online Registration System (ORS), which has been enhanced to allow members to assign "Enter and Submit" access to Qualified Individuals.
Preparing for the New Requirements
It is advisable to act relatively soon to designate the appropriate individuals with "Enter and Submit" access in ORS and ensure they are fully prepared to comply with the new requirements before the October 15, 2024 deadline. These amendments reflect the NFA’s ongoing commitment to enhancing transparency and maintaining a compliant derivatives market. By requiring more frequent updates and designating specific individuals for the review and submission process, the NFA aims to improve the accuracy and reliability of the information it receives from its members.
For more information on how these changes may impact your firm and for assistance in ensuring compliance with the new NFA requirements, please contact our office. We are here to help you navigate these new regulations and maintain your good standing within the NFA and the broader derivatives market.
Endnotes:
https://www.nfa.futures.org/index.html
https://www.nfa.futures.org/rulebooksql/rules.aspx?Section=4&RuleID=RULE%202-52
https://www.nfa.futures.org/news/PDF/CFTC/052024-Amend-Interp-9031-9032-Arbitration-Rules.pdf
https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=5672