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Series 31 study materials
Series 31 study resources

Series 31: Regulatory and Compliance: NFA Rules, Advertising, and Records

Series 31 · Work through your exam, one topic at a time.

All guide sections

Regulatory and Compliance: NFA Rules, Advertising, and Records

Who polices what

The CFTC is the federal regulator; the NFA is the self-regulatory organization with which futures professionals must register. Registration categories include FCM, IB, CPO, CTA, and associated person (AP). Firms file Form 7-R, individuals file Form 8-R, and updates are required when information changes. APs must meet the ethics-training and continuing-education requirement and are screened for statutory disqualification.

Sales-practice rules dominate the exam. NFA Rule 2-30 requires know-your-customer and suitability analysis and, for options, risk disclosure and customer approval. NFA Rule 2-29 governs promotional material: it must be fair and balanced, must not be misleading, must never promise profits or imply risk-free trading, and must label hypothetical results with the required disclaimer. Testimonials need disclaimers and cannot be presented as representative of typical results. Promotional material must be approved by a designated supervisor before use and retained for five years, with the first two years readily accessible. CFTC Rule 1.31 sets the format and retention standards for books and records.

Traps that appear in questions

  • Retention periods: five years, first two easily accessible. Answers offering three years or two years are wrong.
  • Language such as guaranteed returns or risk-free is a Rule 2-29 violation even if a disclaimer appears elsewhere in the piece.
  • Hypothetical or backtested results may be shown only with the required caveat and never presented as actual performance.
  • The NFA does not pre-approve advertising; internal supervisory approval is the requirement.

Worked example

An AP emails prospects a chart of 38% annualized returns from a backtested model with no disclaimer and no supervisory sign-off. That is two violations: unlabeled hypothetical performance and unapproved promotional material. The fix is to label the results hypothetical, add the disclaimer, obtain prior approval, and retain the piece for five years.