Financial Requirements Section 11(b) and (c) prohibit Forex Dealer Members (FDMs) from including assets held at unregulated persons as current assets for purposes of determining adjusted net capital and from using such unregulated persons to cover currency positions. The rule defines a person as unregulated unless it is one of the persons enumerated in the rule. The enumerated persons include, among others, futures commission merchants registered with the CFTC and brokerdealers registered with the SEC, as well as certain entities regulated as a foreign equivalent.

Pursuant to Section 17(j) of the Commodity Exchange Act, as amended, the NFA hereby submitted to the CFTC proposed amendments to Financial Requirements Section 1 regarding minimum net capital requirements for futures commission merchants and introducing brokers. NFA’s Board of Directors approved this proposal on February 18, 2010.

• Increase the minimum dollar capital requirement from $500,000 to $1,000,000;

• Increase the risk-based capital requirement for non-customer accounts from 4% to 8% of the total risk margin requirement for positions carried in non-customer accounts; and

• Include cleared over-the counter derivative positions in an FCM’s risk based capital calculation for customer and non-customer accounts.

A related amendment to Compliance Rule 2-29(h) requires that any audio or video distributed through media accessible by the public (e.g., through the internet) that makes any specific trading recommendation or refers to the extent of profit previously obtained or achievable in the future must be submitted to NFA for review and approval at least 10 days prior to first use. In this way the amendment subjects certain on-line advertising to the same requirements as similar television and radio advertising. To allow Members sufficient time to submit these types of advertisements to NFA for approval, the amendment becomes effective as of February 1, 2010. Accordingly, any audio or video advertisements that a Member posts on-line after January 31, 2010, must have been previously reviewed and approved by NFA.

NFA’s December 8, 2009, submission letter to the CFTC contains a more detailed explanation of the changes. You can access an electronic copy of the submission letter at: http://www.nfa.futures.org/news/PDF/CFTC/CR2-29_IntNotc_re_OnLine_Social_Networking_120209.pdf.

On-line social networking groups have changed the way people make trading decisions. A number of NFA Members sponsor blogs, chat rooms, and forums (also called message or bulletin boards), and some use sites like Facebook or Twitter for business purposes. Associates may also sponsor or participate in these groups. Unfortunately, these on-line communities provide opportunities for posters to spread unsubstantiated rumors and intentional misrepresentations. The form of communication does not change the obligations of Members and Associates who host or participate in these groups, and electronic communications must comply with Compliance Rules 2-9, 2-29, 2-36, and 2-39.

NFA’s interpretive notice entitled NFA Compliance Rule 2-9: Supervisory Procedures for E-Mail and the Use of Web Site,” (NFA Manual, ¶ 9037) provides guidance on how NFA’s promotional material and supervision rules relate to email and web sites but does not specifically address other types of electronic communications. This notice discusses a Member or Associate’s responsibilities in connection with on-line social networking facilities such as blogs, chat rooms, forums, Facebook, and Twitter.

Obviously, any electronic content that can be viewed by the general public, or even by a more closed community that includes current and potential customers, can be promotional material. For example, blogs dealing with commodity futures or options are promotional material when written by an NFA Member or Associate, and forex blogs are promotional material when written by a Member or Associate subject to the forex rules.

Therefore, content generated by the Member or Associate is subject to the requirements of NFA Compliance Rules 2-29, 2-36, or 2-39. The same is true for futures, options, or forex content written by a Member or Associate and posted on a third party’s site.

The issue becomes more complicated for user-generated comments responding to a Member or Associate’s blog and for Members and Associates who host chat rooms or forums. What is their responsibility for posts from customers or others over whom the Member or Associate has no direct control? When inadequately monitored, social networking sites may contain misleading information, lure customers into trades that they would not normally make, or be used in an attempt to manipulate prices.

If a Member or Associate hosts a blog, a chat room, or a forum where futures or forex are discussed, the Member or Associate is required to supervise the use of that community. This requires, at a minimum, that the Member or Associate regularly monitor the content of the sites it hosts, take down any misleading or otherwise fraudulent posts, and ban users for egregious or repeat violations. Not only are these actions required by NFA’s supervision rules, they are both common sense and common practice. Similar requirements apply to Facebook and other sites that allow others to post to the Member or Associate’s “wall” or other assessable area.

Audio pod-casts and videos on the Internet—whether on the Member or Associate’s Web site or on an independent site such as You-Tube—are similar to radio and television advertisements. If they make specific trading recommendations or refer to profits that have been obtained in the past or can be

These dues apply when the Forex Dealer Member offers to be a counterparty to
a forex transaction or accepts a forex trade (whichever is earlier), and NFA will
send the Member an invoice for the minimum dues ($50,000 or $45,875) minus
any amount already paid for that membership year. Thereafter, the dues will be
assessed on the firm’s membership renewal date and will be based on the Forex
Dealer Member’s latest certified financial statement.

(proposed amendment)
The only exception to the dues set forth above is a situation in which NFA does
not serve as the DSRO for a Forex Dealer Member and the DSRO has agreed to
examine the Forex Dealer Member’s forex activities. In this case, the surcharge
paid by the Forex Dealer Member, regardless of gross annual revenue, is
$12,000. Accordingly, for such a Forex Dealer Member the dues to be assessed
at the time it offers to be a counterparty to a forex transaction or accepts a forex
trade (whichever is earlier), and on its membership renewal date thereafter, will
be $13,500.

-If NFA believes that a Member’s internal controls are inadequate at any time, NFA’s Compliance Director may require it to provide to NFA an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. -

No person, unless eligible for membership in the contract market category, shall be eligible to become or remain a Member unless at least one of its principals is registered as an “associated person” under the Act and Commission Rules.

(1) If any Member fails to have at least one principal that is registered as an “associated person” NFA shall deem that Member’s failure to be a request to withdraw from NFA membership and shall notify that Member accordingly.

Amount required by (a)(i) + .05(customer liabilities – $10,000,000