Reed Smith Client Briefings

On March 5, 6 and 8, 2019, the National Futures Association (NFA) filed proposed amendments to several of its bylaws, compliance rules, guidance, and interpretive notices with the Commodity Futures Trading Commission (CFTC). The amendments continue the NFA’s efforts to incorporate swaps into its jurisdictional oversight by proposing proficiency requirements for swap associated persons (APs), incorporating swaps into certain NFA compliance rules, and extending enhanced supervision requirements to swap dealer (SD) and major swap participant (MSP) members.1

Autoren: Peter Y. Malyshev Ilene K. Froom Joseph M. Motto Le-el Sinai

These revisions will have a dramatic impact on the NFA’s regulated members because its jurisdiction will be more aligned with the jurisdiction over swaps given to the CFTC by the Dodd Frank Act of 2010.2 This means that the NFA could regulate, investigate, and enforce its requirements applicable to swaps similarly to the NFA’s traditional authorities applicable to futures. Preparing for compliance with these revisions, NFA-regulated entities will need to review their trading practices, assess the adequacy of their compliance programs, revise their compliance manuals, train their personnel, and become prepared for future NFA audits in connection with their swap activities. 

This Reed Smith client alert summarizes the amendments relating to swaps and reminds NFA members, regardless of whether they are located in the United States or overseas, of their recurring compliance obligations, including compliance with respect to transactions in crypto-assets. For a summary of the NFA’s amendments relating to swaps, please see Appendix A of this client briefing.

(1) Proficiency requirements for swap associated persons

The NFA has traditionally required that APs of registered or required-to-be-registered NFA members engaged in futures activities take and pass appropriate exams to demonstrate their proficiency (similar requirements apply to members of the Financial Industry Regulatory Authority (FINRA)).3,4  APs of SDs and MSPs and APs of other NFA registrants that only engaged in swaps business (i.e., “swap firms” or entities that did not engage in futures business) have not had to take any exams.5