NFA Issues Notice on Late Disclosure Filing Fee (Notice I-14-11)

The National Futures Association ("NFA") issued a Notice to Members regarding its recently adopted rule change, which requires a $1,000 fee when a firm or individual fails to disclose a disciplinary matter on a registration application, or to promptly update an existing registration record to disclose a new disciplinary matter. The rule becomes effective on June 1, 2014, and will apply to registration applications filed after that date as well as updates to report matters occurring after that date.

According to the NFA, its staff spends a considerable amount of time and effort obtaining disclosure of matters that applicants or registrants fail to disclose but that the NFA discovers on its own. The NFA stated that the fee in the recent rule change is intended to offset in part the cost associated with this time and effort.

The late disclosure fee will be imposed irrespective of whether or not the NFA initiates an adverse registration action for non-disclosure, which the NFA explained would result if it determines that nondisclosure is willful and not due to negligence or carelessness. With respect to the disclosure of new matters, the NFA stated, the sponsor is responsible for reporting matters promptly that relate to the firm, as well as matters related to associated persons ("APs") and principals.

The rule also provides that, in the case of an AP's or principal's nondisclosure, the individual's sponsor is responsible for performing sufficient due diligence to ensure that all matters requiring disclosure are disclosed. Consequently, if an AP or principal fails to disclose a matter, the sponsor is responsible for the payment of the late disclosure fee. However, the rule does not prohibit the sponsor from requiring reimbursement by the individual for the late filing fee.

See: NFA Notice I-14-11.