The Forex industry has grown substantially in the United States and so has the number of online trading brokerages. With this new growth came along innovative financial services and trading brokerages, but also numerous scams and fraudulent brokers. Therefore, there was a strong need for a powerful regulatory authority to regulate the markets and provide a safe, secure, and transparent investment environment. One of the most prominent regulatory authorities in charge of this is the National Futures Association (NFA).show more
The National Futures Association (NFA) was first established in 1982 but took on more responsibilities and power in 2008 after the financial crisis. Since 2008, the NFA took over the regulatory responsibility for forex brokers and other financial entities. The NFA operates as an independent regulatory authority, not connected with the government. However, it does work in accordance to legislation and with other regulatory authorities such as the U.S. Commodity Futures Trading Commission (CFTC). The NFA’s primary role in the financial markets is to safeguard the integrity of financial markets and protect investors in doing so. This is a very large role and the NFA currently has over 4,200 firms and 55,000 associates under their regulation.
The NFA has numerous important responsibilities that include not only the protection of the financial markets, but the protection of the participants involved. This includes investors, traders, brokerages, and other financial services. To protect these participants, the NFA is responsible for the creation and implementation of various rules and regulations. As well, they are responsible for the licensing of financial services such as forex brokers and the renewal of these licenses. Also, they are responsible for the supervision and monitorization of these firms to ensure they are compliant with the regulations and guidelines laid out for them. The NFA must also take action against fraudulent brokerages by conducting investigations, taking legal action and issuing fines. Additionally, the NFA is responsible for informing and educating investors and consumers about the financial markets.
The most important role of the NFA is to protect you the investor and consumer. Literally everything they do is for your protection and the integrity of the financial markets. For instance, the NFA issues warnings about fraudulent brokerages and scams in the industry. As well, they take complaints from consumers and investors, and initiate investigations to resolve these complaints. They supervise and monitor brokers to ensure they follow their guidelines and remove licences from those who don’t. All in all, the NFA does a wide variety in order to protect investors and consumers.
NFA regulated brokers must adhere to strict guidelines to maintain licencing and regulation by them. The guidelines are set in place for the protection of consumers and to keep the financial markets fair and transparent. All brokers regulated by the NFA are required to submit periodic reports of their financials and services offered. Also, they must undergo auditing on an annual basis by a trusted third party auditing service. As well, brokers must hold their client funds in segregated bank accounts, and of course, there are numerous other guidelines they must follow.