NFA Arbitration

The National Futures Association (NFA) is an industry-wide, self-regulatory organization overseeing the United States future markets. It is an independent regulatory organization with no ties to any specific market place. Membership in the NFA is mandatory for everyone conducting business with the public on the U.S. futures exchanges.

One of the services provided by the NFA is the administration of a dispute resolution forum, which is subdivided into mediation and arbitration services. The significance of this is that, as a member of the NFA, members are subject to mandatory arbitration if the customer so elects. Section 2 of the NFA Rules, labeled “Arbitrable Disputes,” which you can view here.

In addition, the agreements that a customer executes with an introducing broker may contain an arbitration agreement. If it does, the arbitration agreement must comply with Commission Rule 166.5.

As an investor, you will notice that there are many attorneys who advertise in the newspaper and on television and radio seeking clients that have disputes with securities firms. These disputes are usually arbitrated before the Financial Industry Regulatory Authority (FINRA), a self-regulatory authority overseeing securities broker-dealers and account executives. One of the big differences between an NFA arbitration and a FINRA arbitration is eligibility period of time that an investor has to file his or her claim.

Pursuant to FINRA Rule 12206, a FINRA arbitration claim can be commenced within six years from the event or occurrence giving rise to the claim. This is in contrast to the NFA eligibility rule (Section 5), which provides in relevant part that

“No Arbitration Claim may be arbitrated under this Code unless an Arbitration Claim or notice of intent to arbitrate (see Sections 6(a) and (c)) is received by NFA within two years from the date when the party filing the Arbitration Claim knew or should have known of the act or transaction that is the subject of the controversy. NFA shall reject any claim that is not timely filed. If, in the course of any arbitration, the panel determines that the requirements of this section have not been met as to a particular claim, the panel shall thereupon terminate the arbitration of the claim without decision or award.”

Please keep in mind that there is a difference between a claim being eligible for submission to arbitration and statute of limitation issues.

Because of the eligibility distinction between NFA and FINRA arbitrations, it is important to contact a qualified attorney to discuss your complaint as soon as possible as it may take some time to reconstruct what actually happened to you so that the legal basis of your complaint can be determined, put forth in a claim and filed. Although, with NFA proceedings, if you are approaching the two-year time limit for filing a claim, you may submit what is called a “Notice of Intent to Arbitrate.” A Notice of Intent does not obligate you to file a claim, however, it does temporarily toll (or stop) the two-year time limit to provide you with a little extra time to file your claim. NFA must receive the Notice within the two-year time limitation period in order to extend the time period allowed to file a claim.

Another distinction between a NFA and FINRA arbitration is that: (1) in a FINRA arbitration, the client must sign a submission agreement agreeing to submit the matter in controversy to arbitration and to abide by the FINRA arbitration rules: and, (2) in an NFA arbitration submission, the following attestation must be included in the claim or answer: “The undersigned certifies that, to the best of his/her knowledge, information and belief, formed after a reasonable inquiry, the statements set forth in this pleading are true and correct.”

To learn more about how we can represent your interests in commodities litigation, please contact our Boca Raton law offices by telephone at 561-406-4644 or reach us online.