December 9, 2019

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Effective Date for Amendments to NFA’s Promotional Material Rules and Interpretive Notices

On November 13, the National Futures Association (NFA) issued Notice to Members 1-19-25, announcing that amendments to NFA Compliance Rule 2-29 and NFA Compliance 2-36 will become effective on January 1, 2020.  Compliance Rules 2-29 and 2-36 and related Interpretive Notices establish requirements for an NFA Member’s communications with the public and use of promotional material.

NFA recently amended Compliance Rules 2-29 and 2-36 to clarify their applicability, better reflect current technology and business practices and address the use of hypothetical performance in promotional material by Commodity Pool Operator (CPO) Members operating pursuant to a CFTC Regulation 4.7 exemption.

NFA amended Compliance Rule 2-29 to accomplish the following:

  • Clarify that the scope is limited to Futures Commission Merchant (FCM), including an FCM dually registered as a swap dealer with respect to its FCM activities, introducing broker, CPO and commodity trading advisor Members;

  • Expand the scope to specifically apply to all commodity interest (not just futures-related) activities;

  • Update the definition section to replace the term “futures” with the term “commodity interest” and specify that promotional material includes communications disseminated through electronic communications;

  • Specify that a Member must submit to NFA for review and approval all forms of audio and video promotional material that make specific trade recommendations or discuss profit achieved in the past or that can be achieved in the future; and

  • Modify existing relief available to CPO Members operating pursuant to a CFTC Regulation 4.7 exemption to require those Members to generally comply with the Rule’s hypothetical performance disclaimer requirements, including certain requirements set forth in the NFA Interpretive Notice entitled “Compliance Rule 2-29: Use of Promotional Material Containing Hypothetical Performance Results” (e.g. requirements related to extracted performance and composite performance).

NFA also amended Compliance Rule 2-36(g) to specify that forex dealer members (FDM) and Associates of FDMs must comply with certain provisions of Compliance Rule 2-29 and related Interpretive Notices. Finally, NFA made corresponding amendments to the related NFA Interpretive Notices.

The Notice is available here.

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About this Author

Gregory Uffner, Financial Services Attorney, Katten Law Firm
Associate

Gregory Uffner is an associate in the Financial Services practice. 

While in law school, Gregory was an associate editor for the Moot Court Board, a member of the Fordham Urban Law Journal and served as managing editor for the Fordham Sports Law Forum.

212.940.6485
Kevin M. Foley, Finance Lawyer, Katten Llaw Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

Kevin has served as counsel to the Futures Industry Association (FIA) for more than 20 years. In 2012 he was recognized for his exemplary efforts on behalf of the association and the industry, in particular for his guidance in navigating the challenges confronting FIA member firms in complying with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

312-902-5372