For Release: August 9, 1996
Section 210 of the Futures Trading Practices Act of 1992 added a new paragraph (b) to Section 4p of the Commodity Exchange Act (Act) to mandate ethics training for persons required to be registered under the Act. On April 6, 1993, the Commodity Futures Trading Commission (Commission) adopted Rule 3.34 to implement this Congressional mandate. The Commission's Division of Trading and Markets (Division) is issuing this Advisoryas a further reminder to registrants of their obligations under Section 4p(b) of the Act and Commission Rule 3.34.
New registrants must attend ethics training within six months of being granted registration and every three years thereafter. The initial training is required to be at least four hours in duration; subsequent training must be at least one hour in duration. Persons registered when Rule 3.34 became ef fective on April 26, 1993 were granted until April 26, 1996 to attend an initial training session of at least two hours in duration and are required thereafter to attend a one-hour session every three years.
NFA has been maintaining records of ethics training attendance. Although most registrants completed their initial training in a timely manner, it is apparent that many failed to do so. The Division notes that the Commission stated when it adopted Rule 3.34 that it is "part of the firm's supervisory obligation to assure that training has been attended by APs and failure of an AP to attend as required could subject both the AP and his sponsors to enforcement action. Similarly, a contract market has an affirmative obligation under the amendments to Rule 1.62 to assure that its [floor brokers (FBs)] and [floor traders (FTs)] receive appropriate ethics training and failure of an FB or FT to do so could result in enforcement action against the FB or FT and the contract market." In addition, the Division believes that failure to comply with the ethics training require ments could be deemed "other good cause" to affect a person's registration in a statutory disqualification proceeding.
The Division also wishes to state its views concerning certain other points related to ethics training in response to inquiries received by staff from the industry. Ethics training is required of all registrants, even those who may consider themselves "inactive." There is no category of inactive regis tration under the Act, and the Division of Trading and Markets has opined that the Commission's general policy is to require a person registered in a particular capacity to comply with all rules pertaining to that category of registrant, irrespective of whether such person actively engages in all activities permitted by virtue of his registration status. In adhering to the Congressional mandate for ethics training, the Commission has not granted exemptions from such training. If a person is regis tered, he is subject to the training requirements set forth in Commission Rule 3.34, regardless of his level of activity.
For most registrants (i.e., those registered when the rule became effective on April 26, 1993), the Commission permitted three years to complete the initial ethics training session and has established a periodic three-year cycle for additional training. The Division believes that this has been and is a flexible and accommodative schedule for registrants. Indeed, the Division viewed the original three-year period as an appropriate time frame for ethics providers to establish themselves and for registrants to arrange their schedules to comply with the Con gressional mandate. The Division believes that any further extensions of time for original or periodic training are unwarranted.
Finally, the ethics training requirement must be directed towards a registrant's responsibilities to the public under the Act. Therefore, training related to the securities laws, general legal ethics training or training for fields of endeavor other than the futures industry do not satisfy the obligations under Section 4p(b) of the Act and Commission Rule 3.34. Registrants and their sponsors can contact NFA's Information Center at 800- 621-3570 for a list of ethics training providers.