Series 30 key terms

A location of an NFA member, other than its main office, where futures or options business is conducted with customers or where customer orders are taken. It must be run by a registered branch office manager.

The registered associated person responsible for day-to-day supervision of a branch office, including reviewing employee conduct, approving account files and sales material, and making sure the office follows CFTC and NFA requirements.

A member's documented system stating who supervises which activities, how problems are detected and escalated, and what records prove the review happened. The procedures must fit the firm's actual business and be updated as that business changes.

A periodic, documented review of a branch office's books, records, sales materials, and account files, carried out by supervisory personnel to test whether required procedures are actually being followed.

A firm that solicits or accepts orders for commodity futures or options and accepts money, securities, or property to margin those trades. An FCM must register with the CFTC and be a member of NFA.

A firm or individual that solicits or accepts customer futures orders but does not accept customer funds to margin the trades. An IB operates either under a guarantee from a clearing FCM or with its own capital.

A person who, for pay, advises others on buying or selling commodity futures or options, or who issues analyses or reports about them. Registration is required unless a specific exemption applies.

A person who runs a pooled investment vehicle and solicits funds that will be traded in commodity futures or options. CPOs generally must register and give prospective participants a disclosure document describing the pool and its risks.

A ceiling set by the CFTC or an exchange on the number of speculative contracts that one person, or a group of persons acting together, may hold in a given contract and delivery month.

Relief from speculative position limits for positions that offset a real exposure in the cash market. The trader must apply and show a bona fide hedging purpose, and the relief can be conditioned, limited, or withdrawn.

A situation where a floor broker or trader fills customer orders while also trading a personal account in the same contract during the same session. It is restricted because the trader can see customer orders before executing them.

A transaction, or a matched pair of transactions, where the same beneficial owner is on both sides, creating the appearance of trading without any real change in ownership. Wash trades are prohibited.

A transaction in which a broker matches a buy order and a sell order from two different customers at the same price and time. Exchange rules control when it is allowed and how it must be recorded and reported.

Putting a personal or firm order in ahead of a known customer order in order to profit from the price move the customer order is expected to cause. It breaches the duty to put customer interests first.

The duty to learn each customer's financial circumstances, trading experience, and objectives, and then to recommend trading that fits those facts. The information gathered must be documented and kept.

A written warning given before trading begins that futures and options involve substantial risk of loss, that the customer may lose more than the amount deposited, and that past performance does not predict future results.

A signed written authorization that names the person permitted to enter orders for a customer's account without approval of each individual trade, together with the customer's signature. Without it, every order needs specific consent.

Any advertisement, sales literature, website, seminar slide, or similar communication directed to the public. It must be fair and balanced, must not mislead, and must be approved by a qualified supervisor before use.

Results produced by simulated trading, or from an account that was not actually traded with customer money. Showing them requires clear, prominent disclosure that the results are hypothetical and do not reflect real trading.

Excessive trading in a customer account by the person holding trading authority, done to generate commissions rather than to pursue the customer's stated objectives.

Money, securities, and property that customers deposit to margin futures or options positions. These funds must be held in separate accounts and may not be used for firm expenses or to margin the firm's own trades.

A regulatory capital measure that begins with the firm's net worth and then applies haircuts and adjustments for illiquid or risky assets. A member must keep it above the required minimum at all times.

A daily calculation of the total amount that must be set aside for customers, compared with the assets actually held in segregated accounts. Any shortfall must be corrected at once and reported to regulators.

One account carried by a clearing FCM for another firm that combines that firm's customers' trades. The carrying firm treats it as a customer account, while the originating firm keeps the individual customer records.

A written notice sent to a customer for each executed transaction, showing the contract, quantity, price, and trade date, along with commissions, fees, and other charges.

A periodic report showing a customer's open positions, transactions, and account value, required at least monthly for accounts that carry open positions at month end.

The duty to keep required books and records, such as order tickets, confirmations, and account documents, for the periods set by CFTC rules, generally five years with the most recent two years readily accessible.

A system under which traders holding positions at or above levels set by the CFTC must be identified to the Commission, so it can monitor concentration and risk in a market.

A written, risk-based program reasonably designed to detect and prevent money laundering, including internal policies, a designated compliance officer, ongoing employee training, and independent testing of the program.

A confidential filing with FinCEN made when a member knows or suspects that a transaction involves illegal funds or is structured to evade reporting requirements. The customer must not be told that a report was filed.

Written procedures used to verify each customer's identity before or shortly after an account is opened, using details such as name, address, date of birth, and a government identification number.

The NFA standard, in Compliance Rule 2-4, requiring members and associated persons to deal fairly with customers and to avoid deceptive, high-pressure, or abusive conduct even where no specific rule addresses it.

An individual who solicits or accepts customer futures or options orders, or who supervises those who do, and who is registered with the CFTC through an NFA member firm.

A registered individual who directs a member firm's operations, compliance, or solicitation activity, such as a sole proprietor, officer, partner, or branch office manager.

The application individuals file, through NFA, to register with the CFTC as associated persons or principals. It is supported by fingerprint cards and disclosure of disciplinary and criminal history.

A condition, such as certain criminal convictions or regulatory sanctions, that bars a person from registration or requires special approval before the person may be associated with a registered firm.

A written arrangement in which a clearing FCM assumes responsibility for an introducing broker's customer accounts and regulatory obligations, letting the IB operate without meeting the FCM's minimum capital requirement.