Regulations Flashcards
(126 cards)
1
Q
NFA
A
1976 -Self regulatory regulates all persons conducting futures business with the public.
2
Q
CFTC
A
Commodity Futures Trading Commission Act of 1974
independent agency of U.S government. 5 members 5 year term.
3
Q
CFTC REAUTHORIZATION ACT
A
2008 enforce the Dodd-frank act - must register with the CFTC as “RFEDS”- retail foreign exchange dealers if you did retail forex transactions business. Registered FCMS are permitted to engage in forex without registering as RFEDS. AP must pass both Series 3 & 34.
4
Q
Who regulates stock index futures & stock index futures options?
A
CFTC (FUTURES)
5
Q
Front running
A
Putting orders ahead of customers
6
Q
Customer protection procedure
A
FCM must separate customer assets from the firms & firm cannot use customer funds for business or own trades
7
Q
Future exchanges
A
Must b licensed with CFTC. CFTC designates particular exchanges as contract markets for specific commodities
8
Q
NFA Form 8-R (know your customer type of thing)
A
10yr Employment history 5yr residential 4 AP
9
Q
Reporting limits
A
Max net number of contracts one trader or customer can hold on same side of a comd without having to file daily report(all long & short positions options also)
10
Q
Special accounts
A
Weekly reports of accounts exceeding reporting levels
11
Q
Position Limits
A
Bona Fide hedgers dont have position limits only to speculators
12
Q
How many days does a bona hedger have to notify CFTC of intent exceed position limit?
A
At least 30days b4 establishing
13
Q
commissions became negotiable?
A
March 1978
14
Q
Cftc reparations program
A
Thru a ‘Alj’ preceding of 30k> wide vary if sanctions suspending! revoking !civil penalties & deny trading privileged all exchanges.
Inexpensive way to resolve disputes between future & options customers & registered trading professionals 2yr statue of limitation
Voluntary summery or formal
15
Q
Decisions by ALJ appealed by?
A
Commission and then US court of Appeals
16
Q
Criminal proceeding penalty?
A
Us district court felony punishable by fines or 5yrs prison or both . misdemeanor punishable up to 1yr prison.
17
Q
Statue of limitation
A
Complaints must be filled within 2yrs of date violation occurred or 2yrs the offended party should have known about violation.
18
Q
Who is required to be NFA members
A
FCM IB CPO CTA AP
19
Q
ALJ
A
Administrative law judge
20
Q
Ap dual registration
A
Yes long as NFA is notified each member must certify they know of each other and supervise the AP
21
Q
Appealed denial of registration to NFA ?
A
Must b filed within 30 days to the CFTC
22
Q
Bucket orders
A
Hold but not execute
23
Q
Churning
A
Excessive transactions for them commissions boy
24
Q
Members & Ap share customers profits& loss?
A
Yea w written consent
25
Can promo say "Endorsed by NFA"
Nope
26
Can you terminate a membership under investigation
Nope
27
Can you do business with suspended members
Nope
28
Discretionary account
Must b in writing, grant power of attorney, Ap must have 2yrs experience as a RcR or b a CTA. Firms must supervise INTENSELY must b approved by a supervisor after order is FILLED. MUST REGULARLY review activity.MUST KEEP RECORD OF REVIEWS.
29
RcR
Registered commodities representative
30
Account transfer
FCM has 2days to confirm positions and 3days to transfer customers assets. 5days TOTAL AFTER WRITTEN REQUEST.
31
3rd party control
Not customer nor firm but a family member or some1 else makes trades for customer. EXTRA CARE AND ADDITIONAL RECORDS REQUIRED . WRITTEN PROOF & confirm disclosure documents received
32
NFA Promo Rule 2-29 Apply to
Sales literature ,seminars, advertising newspapers radio tv,newsletters,sales scripts ,internet material , performance charts & graphs
33
Approval of promo material?
Supervisory approval other than the employee who developed it. Main office must approve b4 branch& below locations distribute it.
34
Copy's of promo material maintained?
3yrs from date of use. May file copy's with the NFA
35
Timetable for promo material requirements
Each member keep file of promotional item and copy of supervisory review & approval .Readily assessible 3yrs from last used date & maintained total of 5yrs
36
Review of promo material
NFA does require to submit unless disciplinary action but will review takes up 2 21days.
37
2-29 fairness
Members provide customers with info they need writes of promo use standards and honesty as if it was you seeking investments
38
When do you use Disclaimers (promo)
Using hypothetical results, less than 1 yr exp trading customer accounts ,1year or less exp allocating assets
39
Responsibility of promo material
The member. The Ap prepare the AP & member
40
Truth & balance OF pROMO
Promo material Must b accurate probability of profit must have equal statement covering risk of loss
41
TV & radio promo
If you "pay" it's promo
42
Infomercials pROMO
Popular form of promo must have disclaimer at beginning & end of show
43
Misleading words in Promo
Proven & unlimited shouldn't b used
44
Options promo
Must disclose limited risk on long positions only must disclose can lose entire premium and uncover calls unlimited risk
45
Know your customer
Annual income, networth, investment exp & investment goals
46
Risk disclosure
Must b signed b4 trading. Explain risk of trading futures and potential loss of all and addition funds. They understand . Must b kept in customers files.
47
Account statements time
Monthly statements unless no trades or open positions then quarterly
48
Future option disclosure
Must mention loss of entire premium. Seller unlimited risk, separate option document or generic disclosure document with both
49
Confirmations time
Written confirms of trades no later than next business day
50
Firm Records
Copy of monthly statements, daily record,property/securities deposited, account card,
51
Firm records time
5yrs and must b easily accessible for 2yrs
52
Customer agreement
Gives right to liquidate portion or all positions if margin is not met. & if customer dies
53
Supplemental agreement
Fund transfer form - transfer between securities account & futures account
54
FCM &IB fees
Must b made to customer b4 account is open. All fees cost and charges. In writing how & when they apply and amounts
55
Disclosure exceptions
CTA disclosed all cost to customer "writing"
Member of NFA
Not an individual "corp,partnership"
56
CTA
Any1 paid to give advice on trading commodities paid to analyses or reports on commodities. Trades futures on behalf of clients
57
Disclosure - CTA
Business activity last 5years
Past trading perfm
If has no trading experience as a cta
58
Hold customers assets-CTA
No unless organizations is a FCM register as a CTA
59
Register as a CPO -CTA
Not required unless engaged in forming or operating commodity pools
60
Exempt CTA
Advice affect cash market,Ap acting 4 CTA ,advice less than 15 clients during 12mths. IB, Ltm, non profit farm/trade
61
CTA disclosures
Business exp 5years trading perfm 5years & current year.
| Criminal ,civil, adm action 5years.
62
Perfm record & disclosure updates
Every 9 months no value older than 3months must b submitted to CFTC at least 21 days b4 public
63
Available time for inspection of records
72 hours of CFTC request
64
CPO
Organize commodity pools to speculate in futures , general partner or general manager receives cash security / property to trade futures or options
65
CPool
Monies from many investors pooled distributes profits & losses based on there investment interest invested . Limited partnership
66
CPO disclosure list
Main office of pool & CPO know CPO & CTA APs trade decision maker, executing FCM ,what comd traded, 1st date doc will b used ,disclaimer of CFTC approval.
67
Business activities of CPO disclosed how far back tho
5years
68
CPO disclosure
10% CTA holding & any parties holding 10% or greater must identified . Must disclose the size of pool
69
CPO disclosure 2
Min funds required to begin trading, max funds pool take, max time for holding funds b4 trading, how deposits r returned if pool doesn't receive enough funds to open
70
CPO prior perfm
Must not b older than 3mths,
Most recent 5yrs
&year to date
71
Cpool less that 5years disclose business of how long
Year to date for anything less than 5yrs
72
Less than 12moths cpool performance disclosed what
Entire operating history ,CPO history of all other pools past 3yrs. Separate pool perfm
Hypothetical trading is a pool track record must b disclosed
73
CPO not previously traded disclaimer
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74
CPO perfm update
Monthly begin & end value, current #units held by clients, +&- from capital . Worst drawdown & peak for current year, & 5yr current & 5yr net asset value, ROR.
75
CPO reporting times
500k >Monthly less <500k quarterly reports
76
CPO disclosure
Criminal / adm action against CPO ,CTA, AP & FCM disclosed .
Cost of pool , commissions, or fees paid ,
Amount trading profit required to break even
How often distribute profits & capital
Fed income tax consequence for type of distribution
Redeem interest & restrictions ex end of year or quarterly
77
Can commingle assets of different pools
No each pool on entitles can't combine assets
78
Disclosure appearance
| on ddoc
Tabular form columns on Front page -title DILUTION TABLE with base figure for comparison purposes =net proceeds minus fees to show capital available for trading
79
Department of compliance NFA
Department of compliance
80
Seek injunctive relief
CFTC only not NFA
81
Regional business conduct committees
Conducts investigations by CFTC request ,discovery of NFA , or by order of NFA director of compliance that a violations has occurred ,may have occurred, or about to.
82
Respondent
Party charged
83
Respondent response time to complaint
Written answer to NFA within 30days of date or admission of guilt & waive hearing
84
Who to file appeal with after decision? Time
Appeals committee within 15days
85
Review appeals committee action
Through CFTC within 30days of any action by committee a
86
Appeals made
Ultimately in US courts of Appeals
87
Regional business conduct committee penalties
```
Expulsion
Suspension
Barring 4ever
Reprimand
Fines up to 250k
Cease & desist action
```
88
Member responsibility action
Act immediately certain violations detrimental to public interest
89
Code of arbitration
Settle claims without court
| Generally people who are not exchange members
90
#of arbitrators
<50k >100k 1 but may be 3 if all parties request in writing
100> 3
No more 50 and more 25 = written submission
25k less summary proceeding "no hearing "
91
Arbitration time frame
2 years date complaining party knew ( should have known)
92
Arbitration findings
Binding NO APPEAL
| Failure to pay awards or fines suspension of NFA membership
93
Arbitration claim form
35days receiving notice of intent to arbitrate abandonment
94
Mediation
settlement process no1 wins cheaper
Indy 3rd party works to find solution
No solution proceed to arbitration
95
Floor gov committee
Floor gov committee
96
Execute trades on exchange floor
Only floor traders ,brokers registered with CFTC
97
Wash sales
No change of ownership
98
Exchanges
Select commodities they seek designation as contract market .
Propose specify contract terms
Specifics price limit
T-bond =3points
99
Exchange margin requirements
Must report activity daily 1936 act let exchanged set margin requirements . Under extra circumstances CFTC can set requirements
100
Exchange committee
To protect interest of members and customers
101
Business conduct committe
Investigates transactions of member firms and their customers
102
Arbitration committee
Hears disputes between exchange members
| 2 same exchange matters goes to a.c of that exchange t
103
NFA arbitration
Dispute involving any other parties,trade complaints & charges
104
Hypothetical track record
3 mths
105
Complaining party
Complainant
106
Omnibus account
Intense supervise used by intro member to execute clear their customer trades not in their name
107
Promo material & oral communications
Subject to same standards rule 2-29
108
Promoting selective trades
Cherry Picking
109
Find errors on disclosure doc
Must be corrected in 21 days after discovery
110
Fungibility
Trade same instrument interchangeably across exchanges
| Ex options on stocks
111
CTA & CPO use disclosure documents
9mths
112
Customer account material change
15 days or when aware
113
Termination of ap
File a 8T form
114
Can Cta Advise more than 1 pool without registering As a CPO
Yes
115
Cta & CPO disclosure document submit
21 days b4 use
2 copy CFTC
1 NFA
116
First party to review complaints
Director of compliance
117
Director of compliance
Reports valid complaints to regional committee
118
Member responsibility action (MRA)
require approval of NFA president
Board of directors
Or executive committee
119
Copy's of written complaint forward
To NFA not CFTC
120
U.S. & foreign contracts
Must b segregated
121
Cta abbreviation or simplified disclose doc
For QEP or advisor managed accounts
122
QEP
| Qec
Qualified eligible participants
| Clients
123
Disciplinary process
Director of compliance submits violation to business conduct committee
Business committee compliant issued written outline of violation to member. Member must answer & 30days can request a hearing before a NFA Hearing Panel
If not settle panel issues decision . Compliant may Appel to NFA Appeals Committee which is Board members created to hear matters
Appeals Committee decision is FINAL subject to review by CFTC fines can't exceed 250k
124
Part 2
Summary action taken by president with executive committee to protect the markets /members /customers
No practice to hold hearing b4 it's taken
125
Arbitration proceeding
Settle customer claims & grievance
Code of arbitrations provides framework for procedure
Is mandatory when a Demand for Arbitration is filed by customer
NFA member Arbitration Rules arbitration between NFA members is mandatory also
Arbitrations claims decided by panels of 1-3 arbitrators appointed by BFA secretary have right to request a non member panel
Small claims with written submission
No appeals permitted
Meditation less expensive and no 1 wins just a agreement
126
Offer to settle
No admit or deny of violation
