Overview

Forex Compliance specializes in providing CFTC and NFA regulatory compliance services to domestic and foreign firms that offer forex products to its customers. The recently enacted retail forex rules, which are effective on October 18, 2010, require registration for all (a) US and Non-US firms that offer forex products to US retail forex customers (as generally defined below), and (b) US and Non-US firms that operate physical offices within the US and offer forex products to either US and/or Non-US retail forex customers. The CFTC's new retail forex rules were implemented to protect retail forex customers and to govern forex introducing brokers, forex trading advisors and forex hedge managers dealing with retail forex customers.

Our goal is to help our clients circumnavigate the ever changing and complex regulatory landscape, engage in industry best practices and avoid common regulatory pitfalls by having the proper regulatory compliance guidance and framework in place.

CFTC Retail Forex Rule Definition

The CFTC has recently passed a mandate requiring registration for most forex brokers and managers transacting in retail forex transactions. If your customers fall within the following definitions, then you will be required to register with the CFTC and become an NFA member under the new retail forex rules. A retail forex transaction is one between an eligible counterparty and a retail customer. Generally, retail customers are:

• Individuals with less than $10 million in total assets, or less than $5 million in total assets if entering into the transaction to manage risk, and who are not registered as futures or securities professionals;



• Companies, other than financial institutions and investment companies, with less than $10 million in total assets, or a net worth less than $1 million if entering into the transaction in connection with the conduct of their businesses; and



• Commodity pools that have less than $5 million in total assets.

CFTC Forex Rule Exemptions

The main exemption to registration under the new CFTC forex rule is if your customers are not retail forex customers (as generally defined above) and are Eligible Contract Particpants (ECPs) as defined in section 1a(12) of the Commodity Exchange Act. Please note that there are no de minimus rules regarding the ECP exemption. In other words, to qualify for such exemption all of your customers must meet the definition. If you are not certain as to whether or not you meet such exemption, please contact us.

How we can help

If you require registration, we can assist your firm in the CFTC and NFA registration process as Forex Introducing Brokers (IBs), Forex Commodity Trading Advisors (CTAs) and Forex Commodity Pool Operators (CPOs) and implement the proper compliance programs needed to maintain compliance with CFTC and NFA rules and regulations.

If you are exempt from registration, we can help your firm prepare and/or review existing compliance manuals, promotional materials, including websites, brochures, disclosure documents, fund offering documents and any other sales literature to ensure that your firm complies with all such exemptions to which it is afforded. Please note that just because you are exempt from registration does not mean you are operating properly under that exemption even if you only accept ECPs. It is your responsibility to ensure that your promotional material and communications with the public are not misleading and we can assist you in achieving that goal.

When determining the proper registration category, please note that the CFTC and the NFA makes a clear distinction between forex brokers and forex advisors. Typically, forex brokers collect commissions in connection with introducing accounts and forex advisors and forex pool operators collect advisory fees in connection with advising forex accounts. However, if you are registered as forex CTA or forex CPO, you may collect commissions from retail rorex customers only if it is incidental to your business. In other words, if you are a forex CTA or forex CPO, you can only collect transaction based commissions from retail rorex customer if you also charge that same customer advisory fees. If you collect commissions only, then you are deemed to be a broker and will be required to register as an IB.

Forex Compliance provides services to its clients on an hourly or project basis or via a upfront retainer. Please contact us for more information on pricing.

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

Forex Introducing Broker (IB)

If your firm recieves transaction-based over-the-counter forex commissions and/or participates in the bid/ask for introducing retail forex customers to a FCM, Retail Foreign Exchange Dealer (RFED) or other enumerated counterparty, your firm may need to seek the forex introducing broker (IB) registration category. We specialize in assisting forex introducing brokers with the CFTC registration and NFA membership process and can prepare and/or review your firm's compliance documents and provide both initial and ongoing compliance outsourcing and consulting.

We can also assist firms that are exempt from registration under the ECP exemption by ensuring that all of your internal compliance documents, investment contracts with customers and marketing materials are in compliance with such exemptions to avoid any regulatory inquiries or actions by the CFTC or NFA. Firms operating under such exemption are responsible for properly operating within the boundaries of such exemption and are responsible for ensuring that their promotional material and communications with the public are not misleading, fraudulent or misrepresenting their services.

Registration

Depending on the complexity of your organization, the forex introducing broker registration process with the CFTC and NFA can take from to 3 to 8 months to complete. Our forex introducing broker registration services include, determining proper registration categories, determining types of internal documents needed, reviewing existing compliance documents, supervisory procedures and controls, filing examination requests and filing U-10 applications, scheduling examination testing, filing fingerprint cards, preparing and filing NFA firm application, preparing and filing NFA individual application(s), completion and review of Form 8-R application(s), reviewing and preparing of financial statements and net capital computations, reviewing and cross-referencing self-exam checklist with current operations, assistance in setting up any books and records systems and liaising with your firm and the NFA to address any registration deficiencies and ensure that the registration and interview process is completed in a timely and proper manner.

Those seeking forex introducing broker registration under the new rule are, at a minimum, required to take the Series 3 Exam and Series 34 Exam. However, those individuals that have obtained their Series 3 prior to May 22, 2008 and have not lapsed there license in the past two years are exempt from taking the Series 34. Organizations operating branch offices will be required to have at least one individual per branch with a Series 30 Exam.

Compliance Document Preparation

Each forex introducing broker (IB) firm is unique, has different business models and modes of operation and requires customized compliance documents. Our consultants will work closely with you to learn and understand your business model and develop a tailor made compliance documents that fits your organization’s needs. We provide the following types of compliance document preparation:

• Compliance Manuals and Written Supervisory Procedures
• Supplemental Customer Account Opening Documents
• Subordinated Loan Agreements
• Privacy Policy

Compliance Outsourcing

We offer hands-on ongoing compliance outsourcing services to help your firm meets its regulatory requirements. These ongoing compliance outsourcing may include:

• Telephone Consulting – We can advise you on whether or not registration is required and as well as any alternative routes or exemptions that you may qualify for, analyze existing operations and give you advice on how to implement or restructure existing compliance protocols and answer any other day-to-day compliance questions that you may have. More importantly, we can address any questions that you may have with regulators anonymously as we are in constant contact with them.



• Compliance Seminars – We can conduct compliance seminars to help you meet your annual compliance and ethics training requirements. These seminars cover anti-money laundering issues and concerns, disaster recovery protocols, sales tactics and many other discussions on how to avoid various compliance problems in all departmental areas of your company.



• Promotional Material and Document Reviews – We review existing websites, social networking sites, brochures and marketing materials as well as any compliance, customer and sales related documents that you have in place, including clearing agreements, service provider agreements and employee agreements and make sure that they are compliance with changing rules and regulations.



• Regulatory Interfacing – We can help you respond to examination letters, inquiries, CFTC 4(g) information requests to ensure your interests are protected.



• Record Keeping and Financial Reporting – We can help you maintain a books and records system and help prepare, review and file 1FR-IB Reports on a semi-annual basis and be available to answer various financial related questions.



• Compliance Audits – We can prepare annual attestations of various anti-money laundering and disaster recovery controls as well as regulatory audits of the main and branch office locations for compliance with CFTC and NFA laws, rules and regulations. We will prepare a written report of the findings and submit corrective procedures to be implemented and will also conduct a detailed investigation of known or suspected issues by any representative, branch office or department.

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

Forex Commodity Trading Advisor (CTA)

If your firm recieves advisory fees such as management fees and performance fees for managing retail forex customer acccounts under a power of attorney or discretionary basis, your firm may need to seek the Forex Commodity Trading Advisor (CTA) registration category. We specialize in assisting forex commodity trading advisors (CTAs) with the CFTC registration and NFA membership process and can prepare and/or review your firm's disclosure documents and provide both initial and ongoing compliance outsourcing and consulting.

We can also assist firms that are exempt from registration under the ECP exemption by ensuring that all of your internal compliance documents, disclosure docments and marketing materials are in compliance with such exemptions to avoid any regulatory inquiries or actions by the CFTC or NFA. Firms operating under such exemption are responsible for properly operating within the boundaries of such exemption and are responsible for ensuring that their promotional material and communications with the public are not misleading, fraudulent or misrepresenting their services.

Registration

For most firms, assuming you have all of the required compliance documents in advance, the forex commodity trading advisor (CTA) registration process with the CFTC and NFA usually take about 2-3 months to complete. Our forex CTA registration services include, determining proper registration categories, determining types of internal documents needed, reviewing existing disclosure documents, supervisory procedures and controls, filing examination requests and filing U-10 applications, scheduling examination testing, filing fingerprint cards, preparing and filing NFA firm application, preparing and filing NFA individual application(s), completion and review of Form 8-R application(s), reviewing and cross-referencing self-exam checklist with current operations, assistance in setting up any books and records systems and liaising with your firm and the NFA to address any registration deficiencies and ensure that the registration and interview process is completed in a timely and proper manner.

Those seeking forex commodity trading advisor registration under the new rule are, at a minimum, required to take the Series 3 Exam and Series 34 Exam. However, those individuals that have obtained their Series 3 prior to May 22, 2008 and have not lapsed there license in the past two years are exempt from taking the Series 34. Organizations operating branch offices will be required to have at least one individual per branch with a Series 30 Exam.

Please note that although, each customer is treated as a separate managed account and is not pooled with other investors as in a hedge fund or forex pool, Forex CTAs who utilize PAMM structures to trade multiple client accounts may also need to register as an investment advisor depending on the State in which the PAMM account is operated as some States may view the PAMM structure as a pooled investment vehicle, thereby a security.

Compliance Document Preparation

We can prepare customized disclosure documents that address the compliance requirements of the CFTC and NFA such as, listing the advisors strategy, principal risk factors of the CTA’s forex programs, conflicts of interest, advisory fees, background of the CTA's principals and traders, litigation history and the CTA’s performance. Our consultants will work closely with you to learn and understand your business model and develop a tailor made compliance documents that fits your organization’s needs. We provide the following types of compliance document preparation:

• Compliance Manuals and Written Supervisory Procedures
• Disclosure Documents (D-Docs)
• Privacy Policy

Compliance Outsourcing

We offer hands-on ongoing compliance outsourcing services to help your firm meets its regulatory requirements. These ongoing compliance services may include, answering day-to-day compliance questions, making periodic updates to your disclosure documents, modifying existing supervisory procedures to meet regulatory changes, reviewing websites, advertising and promotional material, setting up record keeping requirements, processing additional registration filings and withdrawals, performing Online Registration System (ORS) updates, conducting and implementing Annual Compliance and Ethics Training Programs, performing Annual Attestations for AML, BCP and other supervisory programs, performing branch office audits, visits and inspections, assistance with documenting the customer complaint process, preparing for a NFA audits and helping respond to CFTC and NFA inquiries.

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

Forex Commodity Pool Operator (CPO)

If your firm solicits outside investors to invest in a limited partnership, forex hedge fund or forex investment pool and recieves advisory fees such as management fees and performance fees from the forex investment pool, your firm may need to seek the Forex Commodity Pool Operator (CPO) registration category. We specialize in assisting forex commodity pool operators (CPOs) with the CFTC registration and NFA membership process and can prepare and/or review your firm's private offering documents (PPM) and provide both initial and ongoing compliance outsourcing and consulting.

We can also assist firms that are exempt from registration under the ECP exemption by ensuring that all of your internal compliance documents, fund offering documents and marketing materials are in compliance with such exemptions to avoid any regulatory inquiries or actions by the CFTC or NFA. Firms operating under such exemption are responsible for properly operating within the boundaries of such exemption and are responsible for ensuring that their promotional material and communications with the public are not misleading, fraudulent or misrepresenting their services.

Registration

For most firms, assuming you have all of the required compliance documents in advance, the forex commodity pool operator (CPO) registration process with the CFTC and NFA usually take about 2-3 months to complete. Our forex CPO registration services include, determining proper registration categories, determining types of internal documents needed, reviewing existing private placement memorandums, supervisory procedures and controls, filing examination requests and filing U-10 applications, scheduling examination testing, filing fingerprint cards, preparing and filing NFA firm application, preparing and filing NFA individual application(s), completion and review of Form 8-R application(s), reviewing and cross-referencing self-exam checklist with current operations, assistance in setting up any books and records systems and liaising with your firm and the NFA to address any registration deficiencies and ensure that the registration and interview process is completed in a timely and proper manner.

Those seeking forex commodity trading advisor registration under the new rule are, at a minimum, required to take the Series 3 Exam and Series 34 Exam. However, those individuals that have obtained their Series 3 prior to May 22, 2008 and have not lapsed there license in the past two years are exempt from taking the Series 34. Organizations operating branch offices will be required to have at least one individual per branch with a Series 30 Exam.

Please note that the following with regards to forex commodity pool registration category:

• operators of forex investment pools may need to register as an investment advisor depending on the State in which the pool is operated as some States may view the pool’s offering document as a security. In such case, it will be your firm's responsibility to meet various SEC and State laws, including your blue sky filings with each respective State in which you solicit investors.



• limited partnerships can be deemed a forex pool requiring forex CPO registration even if there are only two partners in the forex pool and the limited partnership was formed for the purpose of investing in forex products.

Compliance Document Preparation

We can review and modify various aspects of your fund's private placement memorandum (PPM), including your investment strategy, risk factors, conflicts of interest, principal backgrounds, litigation history, performance figure, advisory fees and expenses. Preparation of PPM, Subscription and LP Agreements must be done in conjunction with outside counsel. We provide the following types of compliance document services:

• Preparation of Compliance Manuals and Written Supervisory Procedures
• Review of Private Placement Memorandum (PPM)
• Review of Subscription Agreements
• Review of Limitied Partnership Agreement
• Preparation of Privacy Policy

Compliance Outsourcing

We offer hands-on ongoing compliance outsourcing services to help your firm meets its regulatory requirements. These ongoing compliance services may include, answering day-to-day compliance questions, making periodic updates to your forex pool's offering documents, modifying existing supervisory procedures to meet regulatory changes, reviewing websites, advertising and promotional material, setting up record keeping requirements, processing additional registration filings and withdrawals, performing Online Registration System (ORS) updates, conducting and implementing Annual Compliance and Ethics Training Programs, performing Annual Attestations for AML, BCP and other supervisory programs, performing branch office audits, visits and inspections, assistance with documenting the customer complaint process, preparing for a NFA audits and helping respond to CFTC and NFA inquiries.

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

News

Subject: CFTC Releases Final Rules Regarding Retail Forex Transactions
Release Date: August 30, 2010

Washington, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) today announced the publication in the Federal Register of final regulations concerning off-exchange retail foreign currency transactions. The rules implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Food, Conservation, and Energy Act of 2008, which, together, provide the CFTC with broad authority to register and regulate entities wishing to serve as counterparties to, or to intermediate, retail foreign exchange (forex) transactions.

“These rules of the road will help protect the American public in the largest area of retail fraud that the CFTC oversees: retail foreign exchange,” CFTC Chairman Gary Gensler said. “All CFTC registrants involved in soliciting and selling retail forex contracts to consumers will now have to comply with rules to protect the investing public. This is also the first final rule that the Commission has published to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. We look forward to publishing additional rules to protect the American public.”

The final forex rules put in place requirements for, among other things, registration, disclosure, recordkeeping, financial reporting, minimum capital and other business conduct and operational standards. Specifically, the regulations require the registration of counterparties offering retail foreign currency contracts as either futures commission merchants (FCMs) or retail foreign exchange dealers (RFEDs), a new category of registrant. Persons who solicit orders, exercise discretionary trading authority or operate pools with respect to retail forex also will be required to register, either as introducing brokers, commodity trading advisors, commodity pool operators (as appropriate) or as associated persons of such entities. “Otherwise regulated” entities, such as United States financial institutions and SEC-registered brokers or dealers, remain able to serve as counterparties in such transactions under the oversight of their primary regulators.

The final rules include financial requirements designed to ensure the financial integrity of firms engaging in retail forex transactions and robust customer protections. For example, FCMs and RFEDs are required to maintain net capital of $20 million plus 5 percent of the amount, if any, by which liabilities to retail forex customers exceed $10 million. Leverage in retail forex customer accounts will be subject to a security deposit requirement to be set by the National Futures Association within limits provided by the Commission. All retail forex counterparties and intermediaries will be required to distribute forex-specific risk disclosure statements to customers and comply with comprehensive recordkeeping and reporting requirements.

The final rules become effective October 18, 2010.

For questions and answers regarding final retail foreign exchange rule, download: Final Forex Rules

Last Updated: August 30, 2010

Contact Us

Forex Compliance
815-A Brazos Street, Suite 265
Austin, TX 78701
Tel: +1 512-692-6145
Fax: +1 512 697 0046

Sales

Contact a Forex Compliance representative to learn more about our forex regulatory compliance services. sales@forexcompliance.org

General Information

Contact us to get general information or to provide us with feedback so that we can better serve our clients. info@forexcompliance.org

Recruiting

Contact our human resources department and learn more about job openings at Forex Compliance. jobs@forexcompliance.org

IMPORTANT NOTICE REGARDING OCTOBER 18, 2010 DEADLINE: Please note there may be significant delays in processing your application due to an influx of applications for forex registrations. Once your application has been submitted to the NFA, the registration process can take anywhere from 3 to 6 months and can take longer if you are not prepared. If you are required to be registered and have not done so by such date, you will not be permitted to conduct any retail forex business. Contact us as soon as possible so that we can ensure that your firm does not experience any unnecessary delays.

Request Info

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