How does the NFA fight crypto fraud

David Kemp

The National Futures Association (NFA) was established in 1976 in the United States to combat fraud. It is self-regulating and serves to protect the interests of all market participants. In order to conduct its activities, the brokerage organization must obtain the appropriate license.

Features of the NFA

A broker who has obtained a license from The National Futures Association is obliged to obey not only the rules of the trading platforms on which they operate but also the requirements of the regulator. This refers to ethical behavior, reliability, and accurate compliance with the laws of the U.S. Federal financial regulation regarding the issuance of reports and orders on the exchange floor. In case of violation of the exchange rules, fines are imposed, the license can be suspended or canceled altogether.

Changes in the NFA:

  • In 1993 the rule was introduced: "About telemarketing" with the purpose of strict suppression of fraudulent actions in the field of brokers and exchanges. Now brokerage organizations must approve advertising with the Association before it goes on the air and provide recordings of telephone conversations with their clients on demand.
  • In 2001, the Association became the first regulator to license exchanges and brokers operating on the Internet. This has led to a sharp development of online commerce in various countries of the world.
  • Since 2008, the Association and brokers operating under its license have banned the use of lock and hedge in Forex and derivatives. Since then, dealers can no longer use compensating positions on the client account. Now, these orders have to be compensated based on the practice FIFO.

NFA's methods of dealing with broker fraud

  • A detailed check of brokerage organizations (including cryptocurrency) that intend to work on US futures trading platforms with currencies, stocks, and bonds. This can be a study of the history of the origin of money or a comprehensive financial audit, as well as checking the reporting of the execution of orders.
  • The Association is authorized to restrict or deny the rights of brokers on American futures trading platforms.
  • The Association monitors the ethics of advertising cryptocurrency brokers, warning them about the risks, the minimum necessary capital for brokerage organizations, platforms for market participants, licensing knowledge of broker employees, and so on.
  • The NFA exchanges information with the CFTC (You can read more about it in the article "The U.S. Commodity Futures Trading Commission (CFTC)"), the FBI, and other American law enforcement agencies.
  • The Association is authorized to use financial and organizational sanctions against brokerage organizations that have violated the rules. This can mean sending a warning letter, a fine of up to a quarter of a million dollars, or revoking a license.

The national futures association is actively fighting crypto fraud. Through its activities, brokerage organizations ethically communicate with their clients and respect their rights. Working with other regulators and the Federal Bureau of investigation allows you to best protect the interests of your clients. On our portal, you can read about other organizations that regulate the work of brokers in the United States.