NFA Reminds Members Engaging In Virtual Currency Of Ongoing Disclosure Obligations – Finance and Banking

NFA reminded futures commission merchants
(“FCMs”), introducing brokers (“IBs”), CPOs and
CTAs of their ongoing disclosure and reporting requirements when
engaging in virtual currency activities.

NFA stated that FCMs, IBs, CPOs and CTAs must:

• comply with customer disclosure requirements under NFA Notice 9073; and




• immediately notify NFA after it solicits or accepts orders in,
  or executes transactions involving, virtual currencies by amending
  the NFA Annual Questionnaire.

Commentary Conor Almquist

In the years since NFA has implemented virtual currency-related
disclosure and notification requirements, there has been
relatively limited enforcement activity. This reminder
may be NFA’s way of putting firms on notice that there will be
additional scrutiny of virtual currency activities in the future.
While there is not currently standardized disclosure language
relating to virtual currencies, firms should ensure that disclosure
documents address, when relevant, (i) the unique features of
virtual currencies, (ii) price volatility, (iii) challenges in
valuation and liquidity risk, (iv) cybersecurity issues, (v) opaque
underlying or spot virtual currency markets and related asset
verification challenges, (vi) new, untested and potentially
unregulated intermediaries, custodians, exchanges and vendors,
(vii) regulatory uncertainty, (viii) technological risks, and (ix)
potential fluctuations in transaction fees.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.