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SWAPS Compliance Training and Testing due 31 January 2021

Introduction

By a Notice to Members dated 5 January 2021, the National Futures Association (NFA), the self-regulatory organization for the U.S. derivatives industry, reminded NFA members that their associated persons who are required to satisfy NFA’s Swaps Proficiency Requirements must do so by 31 January 2021.1 Individuals who do not satisfy the Swaps Proficiency Requirements by 31 January 2021 will be unable to engage in swaps activities until they have done so.

SWAPS Proficiency Requirements 

The NFA announced the new mandatory swaps training and testing requirements on 25 March 2019. Associated Persons of swap firms (Swap APs) are required to complete the new NFA Proficiency Requirements by 31 January 2021, to remain approved as a Swap AP. There is no grandfathering of persons already registered.

In addition, under the new requirements individuals applying for approval to become Swap APs of a CPO or CTA after that date must have either: passed the Swaps Proficiency Requirements within two years before the date of the application, or passed the Swaps Proficiency Requirements and not had a period of greater than two consecutive years in which they have not been approved as a Swap AP.

The requirements will apply to all Swap APs, even if a firm engages another entity such as a securities broker-dealer to handle solicitation activities. Swap firms include CPOs that operate pools that engage in swap transactions and CTAs that advise clients regarding such transactions. Swap APs are individuals who solicit investors in such pools or clients to open discretionary accounts that may engage in swap transactions, as well as the supervisors of such persons.

The Swaps Proficiency Requirements are administered by an online learning management system and consist of both a training and a testing component. For Swap APs at a CPO or CTA, the training will take approximately four hours to complete and will consist of the following modules:

  1. Swaps Products and Applications (20 test questions);

  2. Regulation of the Swaps Market (20 test questions);

  3. Supervision (10 test questions); and

  4. Compliance, Anti-Fraud, and Other Requirements (10 test questions).

Individuals must receive a score of 70 percent or greater on each subject in order to receive a Certificate of Completion from the NFA.

Conclusion

Swap APs who have not already completed the Swaps Proficiency Requirements should contact their firm's Swaps Proficiency Requirements Administrator or the NFA to complete the requirements by 31 January 2021. The NFA has published a list of Frequently Asked Questions regarding the Swaps Proficiency Requirements. 


1 The Notice to Members, Notice I-21-01, is available here and describes in greater detail the Proficiency Requirements and compliance deadline.

See also Cary J. Meer, Lawrence Patent, Edgar Mkrtchian, Swaps Proficiency Requirements for Associated Persons; Revised Form 7-R (Apr. 8, 2019).

Copyright 2023 K & L GatesNational Law Review, Volume XI, Number 8
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About this Author

Cary J. Meer, Investment Management and Hedge Fund Attorney, KL Gates, Law Firm
Partner

Ms. Meer is a partner in K&L Gates’ New York City and Washington, D.C. offices and a member of the Investment Management and Hedge Fund practice groups.

Ms. Meer structures private funds as limited liability companies, limited partnerships, offshore corporations, common trust funds and business trusts, and prepares disclosure documents and organizational documents for such entities. She also advises investment advisers, private fund managers and investment companies on compliance issues, including under the Investment Advisers Act of 1940...

202-778-9107
Stephen Humenik Financial Attorney KL Gates Law Firm
Partner

Stephen M. Humenik is a partner at the firm’s Washington, D.C. and Chicago offices. He has over twenty years of experience on cross-border regulatory, compliance and enforcement matters involving the U.S. Commodity Futures Trading Commission (CFTC) and global markets for derivatives, physical and financial commodities. Mr. Humenik applies his business, operational, and government experience to the implementation of CFTC regulations, including the trading, registration, clearing and other compliance obligations of the Dodd-Frank Act and other global regulatory reforms. Mr. Humenik counsels...

+1.202.778.9477
Edgar Mkrtchian Investment Management Attorney K&L Gates New York, NY
Associate

Edgar Mkrtchian is a member of the investment management, hedge funds and alternative investments practice group.

Professional Background

Prior to joining the firm, Mr. Mkrtchian served as an Advisor at the Department of the Treasury and as a Special Advisor at the Department of Commerce. He was previously a summer associate at K&L Gates where he assisted asset management firms and financial services companies with transactional and regulatory matters. Mr. Mkrtchian was an extern at the Financial Industry Regulatory Authority and the Commodity Futures Trading Commission...

212-536-3917
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