National Futures Association (NFA) Members Must Disclose Crypto Holdings Per New Requirements


NFA Announces New Set of Disclosure Requirements For Virtual Currencies

The National Futures Association (NFA) has just announced that, from October 31 onwards, all members of this regulator will have to disclose certain information about the risks of investing in cryptocurrencies and outline them for the customer.

This new requirement will be applied to the following agents: futures commission merchants (FCM), commodity pool operators (CPO), introducing brokers (IP) and commodity trading advisors (CTA). Firms that intend to engage in activities related to crypto in the United States will have to have at least one of these actors to operate.

As the crypto market has grown a lot in 2018, the NFA has become concerned about the risks involved in this market and, after a notice sent by Board of Directors, the NFA decided to enforce these new rules for the agents who work with cryptocurrency and blockchain markets in the United States.

One of the main reason for this new rules is that many investors do not seem to completely understand the nature of the risks that they are taking by investing in this market that is highly volatile. From October onwards, the members of the NFA will have to notice their clients of the risks of investing in these assets.

Futures Commission Merchants and Introducing Brokers will have to send two notices for their clients when they begin trading cryptos. These two notices that have to be sent are the “CFTC Customer Advisory: Understand the Risks of Virtual Virtual Currency Trading” and “NFA Investor Advisory: Futures on Virtual Currencies Including Bitcoin”.

Also, if some client of one of these companies buys cryptocurrency-related assets during the month of October but before the end of the deadline, the company must still provide these documents until November 30.

The Commodity Pool Operators and Commodity Trading Advisors, however, will have the responsibility of offering different warnings. Their requirements are a lot more extensive. They need to provide in-depth disclosures about how the pools work for the clients.

Also, they will to provide a standardised disclosure that will explain how the NFA oversights these markets and the same two disclosure files that brokers have to present to their clients.

There also key areas in which additional information must be disclosed in documents, offering documents or promotional materials. These areas are Intermediaries and Custodians, Regulatory Landscape, Technology and Transaction Fees, Cybersecurity, Opaque Spot Market, Virtual Currency Exchanges, Unique Features of Virtual Currencies, Price Volatility and Valuation and Liquidity.

Non-compliant companies and agents that do not follow the rules created by the NFA after October 31 will be fined.

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