The regulatory landscape for NFA Members is shifting significantly. The National Futures Association (NFA) has formally submitted proposed Interpretive Notice 9083 to the Commodity Futures Trading Commission (CFTC) for review, signaling imminent changes to member supervisory obligations for Associated Persons (APs).

Turnkey Trading Partners (“TTP”) recently gained key insights into this development at a brokerage conference in Las Vegas. The event featured a critical panel discussion including Turnkey’s founder and CEO, James Bibbings, alongside NFA’s sitting Director of Audit Management and Education, Patricia Cushing. The focus was squarely on the now-submitted Interpretive Notice 9083 – NFA Compliance Rules 2-9(a) and (d), 2-36(e) and 2-51(d): Member Supervisory Obligations For Associated Persons.

While the notice awaits the conclusion of the CFTC review period (NFA invoked the 10-day provision) and an official effective date, the NFA has indicated the submitted version is nearly finalized. Based on the panel discussion, the submitted text reviewed by Turnkey, and our ongoing conversations with regulators, firms, especially Introducing Brokers (IBs), need to proactively assess and strengthen their supervisory frameworks immediately.

NFA Guidance Aims for Clarity, Not Revolution (But Expect Stricter Enforcement)

The NFA confirmed during the panel that this interpretive notice is not necessarily introducing entirely new concepts but rather, “formalizing and providing more specific guidance on existing expectations.” As NFA stated, “We’ve been examining these areas for years.”

The formal submission now follows NFA’s acknowledgment of the complexities introduced by the post-Covid shift to remote work, which complicates communication monitoring and overall broker supervision. While the notice allows for flexibility – acknowledging that “operations are different across different membership categories and business sizes” – this flexibility comes with a clear expectation: firms must tailor their programs. Copied-and-pasted policies will not suffice, especially concerning supervision and review protocols. NFA stressed that having robust written policies and procedures, coupled with annual reviews consistent with firm operations, are key requirements outlined in the submitted notice.

NFA anticipates an effective compliance date approximately six months after the CFTC review period concludes and the notice is officially published, giving firms time to adapt. However, given the notice is now formally under CFTC review, delaying action is unwise.

Key Focus Areas of Submitted Interpretive Notice 9083:

The notice submitted to the CFTC specifically targets several core supervisory areas:

  1. Hiring Practices: Mandating thorough due diligence prior to hiring Associated Persons (APs) and verifying the qualifications of supervisory personnel.
  2. Communications Monitoring: This is a major focus. Expect heightened scrutiny on monitoring pre-trade communications, internal communications between brokers, and maintaining robust records of all electronic communications (email, text, chat, etc.) related to trading activity.
  3. Order Handling & Trading Activity: Increased oversight on how orders are processed and general trading practices to detect potential misconduct.
  4. Training: Requirements for implementing and documenting adequate, ongoing training programs for APs.

Practical Implications & Insights from Turnkey’s CEO

James Bibbings stressed during the panel that this requires an “attitude change” for some, particularly smaller firms. “This is not your grandfather’s NFA anymore,” he warned, advising against clinging to outdated operational methods.

Bibbings highlighted the need to leverage technology, now more affordable than ever, to manage the burden of monitoring diverse communication channels (like those used in block trades). “In today’s world, everything is electronic,” Bibbings noted, making manual review of vast data increasingly difficult and favoring integrated, recorded systems. Turnkey has consistently advised on managing this process; you can read more in our article: Critical CFTC Supervision and Record Keeping Tips.

Furthermore, Bibbings emphasized that successful implementation goes beyond just meeting standards; it requires a thorough internal risk assessment. Defining clear record-keeping protocols (what, where, how long) and ensuring robust training, documentation, and enforceable disciplinary procedures for policy breaches are critical. There appears to be less tolerance for repeat offenders; NFA will likely cite IN 9083, once effective, to enforce this.

Turnkey Trading Partners: Consistent Advocacy for Robust Supervision

These pending NFA expectations directly align with the guidance Turnkey Trading Partners has consistently provided for years. The panel discussion confirmed the necessity of the proactive, tailored approach to supervision Turnkey advocates. We’ve previously published insights covering:

The points raised by the panel underscore the critical need for firms to address these areas diligently now, reinforcing the preparatory advice Turnkey continues to offer.

The Remote Work Conundrum & Record-Keeping Challenges

Supervising remote employees presents unique challenges addressed in the submitted notice. While the rules do not explicitly differ by location, the practicalities do. Firms need effective systems regardless of where APs operate.

Record retention and collection remain paramount, especially for communications leading to trade execution (aligning with requirements like those found in CFTC Regulation 1.35). Regulation 1.35 and existing NFA interpretive notices on supervision and communications are a complex area. The difficulty lies in capturing interactions across varied platforms (phone, email, IM, potentially texts) and dealing with non-compliance (both broker and customer) regarding approved channels. How does your firm supervise off-channel communications? Panelists strongly implied that NFA audits will specifically target trade reconstructions, rigorously testing if firms can produce all relevant communications as outlined in the proposed IN 9083.

Effectively, the submitted IN 9083 seems to implicitly demand that all business communications (written and potentially oral) be captured for remote workers. This forces a decision: require staff back in the office, or implement comprehensive remote recording/supervision? A standoff is looming; consider your approach now.

Proactive Adaptation Recommended: Act Before the Effective Date!

The panel’s consensus was clear: prepare proactively. Don’t wait for the final CFTC green light and the official effective date. Turnkey is confident enough in the substance of the submitted notice that we are already making necessary updates to customer policy and procedural documentation.

Critically, NFA teams have reportedly been using the core tenets of this now-submitted interpretive notice during regulatory examinations for at least the last six months. Therefore, Turnkey strongly recommends making appropriate policy changes now to align with the submitted IN 9083 and satisfy examiners, regardless of the final effective date.

How Turnkey Trading Partners Can Assist

Navigating these impending NFA supervisory requirements demands expertise. Turnkey Trading Partners offers tailored solutions:

  • Detailed Reviews: Conducting thorough reviews of trading activity, internal/external communications, and promotional materials, drawing on insights from our guidance on performing effective internal compliance reviews.
  • Supervisory Frameworks: Assisting in developing and implementing practical supervisory structures for APs (in-office or remote) aligned with IN 9083.
  • Custom Policies & Procedures: Drafting comprehensive, customized policies that reflect your specific operations and meet the requirements of the submitted notice.
  • Due Diligence: Assisting with due diligence for hiring brokers/traders and adding office locations per the new guidance.
  • Documentation & Attestations: Creating necessary annual attestations and establishing clear, documented processes for supervisory reviews – crucial for NFA audits, a topic covered in our resources on preparing for and managing NFA examinations.

Partnering with TTP ensures you have the robust systems and documentation needed to confidently meet NFA expectations under Interpretive Notice 9083. Contact us today to discuss how we can help strengthen your supervisory framework.