NFA boosts oversight of currency CTAs
The US National Futures Association is clamping down on non-compliant performance disclosures from recently registered foreign-exchange commodity trading advisers, according to Compliance Reporter, a sister publication of EuromoneyFXNews.
NFA compliance manager Vilia Sutkus-Kiela tells CR that the self-regulatory organization has seen a trend developing whereby newly enrolled foreign-exchange CTAs have been providing performance data with investors that isn’t supported by trading and performance records.
The NFA puts this recent trend down to an increase in the number of CTAs enrolling with it due to a new Commodity Futures Trading Commission rule requiring firms that engage in off-exchange FX transactions with retail customers to register with the CFTC and NFA, which came into effect in October 2010, CR reports.
Since then, the NFA has uncovered numerous record-keeping violations, including failing to retain client information on site or failing to maintain executed written trading authorizations from customers, Sutkus-Kiela tells CR. However, of most concern to the NFA is the existence of non-compliant performance disclosures. “If CTAs can’t support how they’ve calculated their returns, it is a pretty serious issue,” Sutkus-Kiela says.
While she declined to tell CR whether the SRO will bring enforcement actions as a result of its findings, she added that the NFA plans to re-examine many FX CTAs and may refer deficiencies to the enforcement team if performance disclosure violations have not been corrected. In a recent regulatory alert to NFA members, Sutkus-Kiela wrote that firms needed to “comply with these regulatory requirements or [they] may be subject to disciplinary action”.
Attorneys and compliance officers tell CR that the NFA’s focus on performance disclosure mirrors increased scrutiny of performance materials at registered investment advisers by the Securities and Exchange Commission.