NFA Compliance Rule 2-9(d) Update

December 4th | 2020

The NFA recently proposed the adoption of Interpretive Notice entitled NFA Compliance Rule 2-9(d): Swap Dealer and Major Swap Participant Supervision of the Use of Marketing Materials (the "Notice"). The notice applies the general principles behind the NFA’s marketing guidance applicable to FCM, IB, CPO, and CTA Members to Swap Dealers (SD) while taking into account that SDs clientele may differ.

Accordingly, SDs must maintain a supervisory system that must include (1) policies and procedures for reviewing and approving marketing materials, (2) training employees on the appropriate content and use of marketing materials, and (3) recordkeeping requirements. A few of the requirements for each of these high-level topics are listed below:

1. All marketing materials used by a SD Member must be reviewed and approved by appropriate SD personnel.

  • Although all marketing materials must be reviewed and approved, the timing of the review and approval may vary based on the type of material and/or the SD Member's relationship with the counterparty.

  • A SD’s supervisory program must specify the type of personnel who are authorized to create marketing materials and those that are authorized to review and approve marketing materials.

  • The reviewer must be someone other than the creator and have general knowledge of NFA and CFTC rules and understand the requirements related to communications with counterparties and marketing materials.

2. SD written supervisory programs must require individuals authorized to create or provide marketing materials to counterparties and the individuals authorized to review and approve marketing materials to be appropriately trained.

  • The training must cover applicable NFA and CFTC rules and include examples of material that are considered fair and balanced communications and not deceptive and misleading, as well as examples that would violate these requirements.

  • The training should also discuss the SD's procedures for the review and approval of marketing material.

  • Other than providing training before allowing an individual to create marketing materials, the NFA does not mandate a particular frequency of training, but an SDs procedures should specify how often training will occur. A few triggers for when training is conducted can include whenever there is a material change in regulatory requirements, a material change in the SD’s policies and procedures, or after a SD identifies a material area of concern.

3. A SD's supervisory program must also outline the SD's recordkeeping requirements related to marketing material. At a minimum, a SD must maintain copies of all marketing materials along with a record of the material's review and approval. These records should be maintained for the periods specified in CFTC Regulations 23.203(b) and 1.31.

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