Release: #3953-96

For Release: October 11, 1996

CFTC Notifies the NFA of the Results of It's Recent Review of

NFA's Registration Processing Program

Washington -- The Commodity Futures Trading Commission's Division of Trading and Markets ("Division") has notified the National Futures Association ("NFA") of the results of its recent review of NFA's registration processing program. The report states that the Division found the design and execution of the NFA program to be in compliance with applicable regulatory requirements. The report describes fifteen significant findings and contains eleven recommendations for enhancement of the program. The recommendations suggest NFA should:

• specify in its Registration Processing Procedures Manual all applicable procedures to ensure that all information on registration forms is complete and reviewed by NFA's staff;
• ensure that NFA management documents quality control procedures;
• specify criteria used for referring applicants with similar names in the Clearinghouse Disciplinary Information System to the Registration Investigations Unit for Investigation.
• document the Business Systems Group's MIS functions and the records it must maintain and cause the Registration Processing Procedures Manual to include certain language currently found in the Information Center Manual.
• implement procedures to follow up on conditioned and restricted floor brokers and floor traders to determine compliance with registration conditions or restrictions;
• revise its Self-Examination Checklist publication to remind member firms to maintain up to date records of the affiliation and status of their APs and to report promptly any changes to NFA;
• include procedures to track individual APs with histories of multiple terminations that may suggest misconduct;
• ensure that their Membership, Registration, Receivables System ("MRRS") can generate a computer listing of persons with smudged fingerprint cards;
• assure all information required to be maintained with NFA by FCMs carrying foreign omnibus accounts is readily available to the Commission;
• coordinate with the compliance departments of the various exchanges and revise written procedures for periodic auditing of registered firms to include verification: (a) that firms are reporting termination of APs in their annual registration updates; and (b) that termination notices are being timely filled and, in particular, that the Securities Industry's Registration Form U-5, if used in lieu of the Form 8-T, is sent to NFA as well as the designated securities regulator; and
• study the feasibility of increasing firm participation in the Direct Entry Program.

A copy of the Division's report is available upon request through the Commission's Office of Public Affairs, Three Lafayette Centre, 1155 21st Street, N.W., Washington D.C. 20581, (202) 518- 5080.