Financial Regulation and Compliance. Kotz H. David

      In addition, the NFA has the authority to take disciplinary actions against any firm or individual that violates its rules. These actions range from Warning Letters for minor rule infractions to formal complaints in cases where rule violations warrant prosecution. Penalties resulting from complaints include expulsion, suspension for a fixed period, prohibition from future association with any NFA Member, censure, reprimand, and a fine of up to $250,000 per violation. The NFA often collaborates with the CFTC, and other law enforcement Agencies to ensure full, comprehensive prosecutions.33

      The NFA has also worked closely with the CFTC and other SROs to adopt a number of initiatives to further safeguard customer funds. The NFA, in conjunction with other SROs, developed and implemented a system in 2013 that requires all depositories holding customer segregated funds on behalf of an FCM to directly report balances daily to SROs. The SROs then perform an automated comparison to the daily reports filed by the FCMs to identify any suspicious discrepancies. In addition, each FCM is required to provide regulators with immediate notification if it draws down its excess segregated funds (funds deposited by the firm into customer segregated accounts to guard against customer defaults) by 25 percent in any given day. Such withdrawals must be approved by the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) or a financial principal of the firm, and the principal must certify that the firm remains in compliance with segregation requirements.34

      All FCMs also must regularly file certain financial information about the firm with the NFA. This information is posted on the NFA's website. The information includes each FCM's capital requirement, excess capital, segregated funds requirement, excess segregated funds, and how the firm invests customer segregated funds.35

      The NFA also began an arbitration program in 1983, providing a method for investors to resolve futures-related disputes. Since that time, NFA arbitration has become the primary venue for dispute resolution for retail futures and foreign exchange (“forex”) customers. The NFA also offers a mediation alternative during the arbitration process in cases where the total amount of the arbitration claim is $150,000 or less.36

      1.6 THE DEPARTMENT OF JUSTICE (DOJ)

      As noted above, these regulatory entities coordinate as appropriate with the Department of Justice (“DOJ”). The DOJ is a federal department designed to enforce the law and defend the interests of the United States.37 The mission of the DOJ is to:

      Offices and groups within the U.S. Department of Justice include the Federal Bureau of Investigation, the Drug Enforcement Administration, the Bureau of Prisons, the U.S. Federal Marshals, and the U.S. Parole Commission. The SEC and CFTC coordinate with the DOJ on enforcement cases, as they often initiate civil proceedings against the same actors or involving similar facts to criminal proceedings brought by the DOJ.

      In addition, the DOJ and SEC share enforcement authority for the anti-bribery and accounting provisions of the Federal Corrupt Practices Act (“FCPA”). The DOJ has criminal FCPA enforcement authority over “issuers” (i.e., public companies) and their officers, directors, employees, agents, or stockholders acting on the issuer's behalf. The DOJ also has both criminal and civil enforcement responsibility for the FCPA's anti-bribery provisions over “domestic concerns” – including (a) U.S. citizens, nationals, and residents, and (b) U.S. businesses and their officers, directors, employees, agents, or stockholders acting on the domestic concern's behalf – and certain foreign persons and businesses that act in furtherance of an FCPA violation while in the territory of the United States. The SEC is responsible for civil enforcement of the FCPA over issuers and their officers, directors, employees, agents, or stockholders acting on the issuer's behalf.39 The SEC, CFTC, FINRA, and NFA all refer potential criminal matters to the DOJ for prosecution.