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Firms and individuals that conduct futures trading business
with the public are subject to regulation by the CFTC and by
NFA. All futures exchanges are also regulated by the CFTC.
NFA is a congressionally authorized self-regulatory
organization subject to CFTC oversight. It exercises
regulatory Authority with the CFTC over Futures Commission
Merchants, Introducing Brokers, Commodity Trading Advisors,
Commodity Pool Operators and Associated Persons
(salespersons) of all of the foregoing. The NFA staff
consists of more than 140 field auditors and investigators.
In addition, NFA has the responsibility for registering
persons and firms that are required to be registered with
the CFTC. Firms and individuals that violate NFA rules of
professional ethics and conduct or that fail to comply with
strictly enforced financial and record-keeping requirements
can, if circumstances warrant, be permanently barred from
engaging in any futures-related business with the public.
The enforcement powers of the CFTC are similar to those of
other major federal regulatory agencies, including the power
to seek criminal prosecution by the Department of Justice
where circumstances warrant such action. Futures Commission
Merchants which are members of an exchange are subject to
not only CFTC and NFA regulation but to regulation by the
exchanges of which they are members. Exchange regulatory
staffs are responsible, subject to CFTC oversight, for the
business conduct and financial responsibility of their
member firms. Violations of exchange rules can result in
substantial fines, suspension or revocation of trading
privileges, and loss of exchange membership.
Words of Caution
It is against the law for any person or firm to offer
futures contracts for purchase or sale unless those
contracts are traded on one of the nation's regulated
futures exchanges and unless the person or firm is
registered with the CFTC. Moreover, persons and firms
conducting futures-related business with the public must be
Members of NFA. Thus, you should be extremely cautious if
approached by someone attempting to sell you a
commodity-related investment unless you are able to verify
that the offeror is registered with the CFTC and is a Member
of NFA. In a number of cases, sellers of illegal
off-exchange futures contracts have labeled their
investments by different names--such as "deferred delivery,"
"forward" or "partial payment" contracts--in an attempt to
avoid the strict laws applicable to regulated futures
trading.
Many operate out of telephone boiler rooms, employ
high-pressure and misleading sales tactics, and may state
that they are exempt from registration and regulatory
requirements. This, in itself, should be reason enough to
conduct a check before you write a check. You can quickly
verify whether a particular firm or person is currently
registered with the CFTC and is an NFA Member by phoning NFA
toll-free at 800-621-3570 (within Illinois call
800-572-9400).
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