Section 4m(1); Rule 4.14(a)(6); NFA Bylaw 1101;
The Division of Trading and Markets responded to an inquiry regarding a registered CTA becoming an NFA member. The Division indicated that NFA Bylaw 1101 provides that an NFA member may not accept an order or handle a transaction for or on behalf of any non-Member of NFA that is required to be registered with the Commission. Accordingly, before a registered CTA could direct client accounts it must be a member of NFA. The CTA indicated that it was contemplating becoming a principal of an IB that is a member of NFA. The Division noted that if the IB were provided with a power of attorney to direct trading in client accounts, its NFA membership would be sufficient for purposes of satisfying NFA Bylaw 1101. However, the IB would fall within the definition of a CTA and, absent an exemption, the IB also would be required to register with the Commission as a CTA. If, however, the customer, instead of giving the power of attorney to the IB, gives it to the CTA directly, the IB would be acting solely as an IB and would not also be required to register as a CTA. However, the IB's NFA membership would not be sufficient as to the CTA for purposes of NFA Bylaw 1101, even though the CTA was a principal of the IB.