2014-02-13T13:07:14-06:00 2013-06-30 GRANT THORNTON LLP 175 W JACKSON BLVD STE 2000 CHICAGO IL 60604 990 2012-07-01 362960981 National Futures Association % DAVID HAWRYSZ NATI 3127811300 300 S RIVERSIDE PLAZA Suite 1800 CHICAGO IL 606066615 DAVID HAWRYSZ 3127811300 2014-02-13 true JULIE A DEE 3128560200 2012 2015-11-30 17:44:51Z David Hawrysz 300 S RIVERSIDE PLAZA CHICAGO IL 60606 67160667 false X www.nfa.futures.org X 1978 IL THE NATIONAL FUTURES ASSOCIATION (NFA) IS A MEMBERSHIP ORGANIZATION FORMED TO MONITOR AND MAINTAIN THE INTEGRITY OF THE DERIVATIVES TRADING INDUSTRY. 30 30 374 0 0 0 0 0 56038810 66733713 522896 426954 0 0 56561706 67160667 0 0 0 0 36148287 42357960 0 0 0 12421319 19987450 48569606 62345410 7992100 4815257 68136205 78466720 17295382 21751874 50840823 56714846 AS A CONGRESSIONALLY AUTHORIZED SELF-REGULATORY ORGANIZATION, NFA'S MISSION IS TO PROVIDE INNOVATIVE REGULATORY SERVICES THAT ENSURE DERIVATIVES INDUSTRY INTEGRITY, PROTECT MARKET PARTICIPANTS AND HELP OUR MEMBERS MEET THEIR REGULATORY RESPONSIBILITIES. NFA WILL BE THE MODEL FOR REGULATORY ORGANIZATIONS BY PROVIDING THE MOST EFFICIENT AND EFFECTIVE REGULATORY ENVIRONMENT POSSIBLE. false false Futures Regulation - Enhancing Customer Protection Since the failures of MF Global in 2011 and Peregrine Financial Group Inc. (PFG) in 2012, NFA, along with the CFTC and other self-regulatory organizations, has worked to strengthen customer protection, improve our regulatory practices and restore confidence in the marketplace. This work has centered on four key areas. 1. NFA unveiled a new system by which NFA can confirm customer segregated and secured amount balances of futures commission merchant (FCM) Members on a daily basis. 2. NFA further enhanced customer protections by increasing the transparency of FCM financial information and provided guidance on FCMs' internal control systems. 3. NFA's Special Committee for the Protection of Customer Funds comprised of NFA's Public Directors engaged an outside consultant, Berkeley Research Group (BRG), to perform an independent analysis of NFA's examinations of PFG. BRG issued a report of its findings in late January 2013 and, since that time, NFA has devoted significant time and energy to researching and implementing the recommendations outlined in the report. 4. And finally, along with other industry groups, NFA commissioned a study to examine the costs of adopting an insurance regime for the U.S. futures industry. - Segregated funds protections In early 2012, NFA began electronically confirming bank balances, which led to the discovery of the PFG fraud. However, this electronic confirmation was only performed during the annual examination process. Therefore, NFA partnered with CME Group to make better use of technology and unveiled a new system by which both NFA and CME Group directly confirm all customer segregated and secured amount balances with banks and other depositories on a daily basis. This segregation confirmation system performs an automated comparison of the information received directly from the depository with the daily segregation reports filed by FCMs, and generates immediate alerts for any material discrepancies. In May 2012, NFA also adopted a number of initiatives to further safeguard customer funds, including a requirement that all FCMs immediately notify regulators if they draw down their excess segregated funds by 25 percent in a given day. These withdrawals must be approved by the firm's CEO, CFO or financial principal. Several months later, the CFTC finalized its rules relating to cleared swaps and cleared swaps customer collateral, which are similar to the requirements for customer segregated and secured amount funds. Because of these changes, NFA amended Financial Requirements Section 16 and its interpretive notice to impose the same requirements currently applicable to customer segregated and secured amount funds to cleared swaps customer collateral. NFA also proposed guidance that outlines the minimum standards that should be part of FCMs' internal controls in an effort to further enhance transparency and promote confidence in the markets. Under the proposed guidance, FCMs will be required to have written policies and procedures that fully explain their internal control systems, and describe the supervisory system established to ensure that the policies and procedures are followed. These policies and procedures also must identify at least one firm principal who is responsible for overseeing that the firm has met the requirements and can respond to regulatory inquiries. Additionally, the guidance also requires that these written policies and procedures, and any material amendments, be approved in writing by an FCM's governing body or senior officer. Finally, the guidance requires FCMs to conduct periodic reviews to ensure that the internal controls are being properly implemented and are effective. - Customer protection initiatives-greater transparency To provide greater transparency about the financial condition of FCMs for futures customers, in November 2012, NFA made certain FCM financial information publicly available through the Background Affiliation Status Information Center (BASIC) on NFA's website. The information includes an FCM's adjusted net capital, required net capital and its excess net capital. The information also includes the amount of customer segregated funds held, the amount of segregated funds required to be held, the amount of excess segregated funds, and how the firm invests customer segregated funds. This information is displayed for each FCM, and includes historical information in addition to the most current data. Additionally, in early 2013, NFA updated its website to display the identical type of financial information for cleared swaps customer collateral as displayed for segregated and secured amount funds in its Background Affiliation Status Information Center system. - Implementing recommendations from the BRG report Shortly after PFG's failure, NFA's Special Committee for the Protection of Customer Funds, comprised of NFA's Public Directors, hired BRG to perform an independent analysis of NFA's examinations of PFG. BRG issued its findings, along with a list of recommendations in January 2013. The recommendations set forth in the BRG report were "designed to improve the operations of NFA audits" based on the results of its analysis. These recommendations covered a range of topics, including examiner hiring, training, supervision, the examination process, risk management and continuing education. Overall, BRG's review found that "NFA audits were conducted in a competent fashion and the auditors dutifully implemented the appropriate modules" following the standards set by the Joint Audit Committee. Upon receipt of the BRG report, NFA's Board of Directors appointed a special committee to oversee NFA's timely implementation of the BRG recommendations. At the outset of the implementation process, NFA staff and the Implementation Special Committee categorized BRG's recommendations into one of four categories: professional development; examination process/risk management; monitoring compliance with segregated funds requirements; and industry interface. NFA then identified the specific actions needed to implement each of the recommendations and tracked the progress of these action steps on a regular basis. A number of BRG's recommendations focused on the modification of NFA's modules that it used during the FCM examination process. To assist with this, the Implementation Special Committee engaged an outside examination expert to review the module enhancements. After a three-month review process, this examination expert concluded that NFA's modifications to its exam modules fully implemented the related BRG recommendations. The BRG report also made a number of recommendations related to NFA's training and development. Among these was a recommendation to promote a greater sense of professional skepticism among its examiners. Prior to receiving the BRG report, NFA formalized a relationship in November 2012 with the Association of Certified Fraud Examiners (ACFE) to ensure its examiners have appropriate training on professional skepticism. Since that time, more than 80 Futures Compliance staff have completed training and passed a test that covers fraud prevention and deterrence as well as fraud investigations to achieve the certified fraud examiner (CFE) designation. With few exceptions, by December 2013, all NFA staff involved in the examination function have completed ACFE training and obtained the CFE designation. Going forward, NFA's certified CFEs will obtain at least 20 hours of continuing professional education in fraud-related topics each year. Other training related to fraud and professional skepticism has been provided to NFA staff during 2013. There were six "Member Lecture Training" sessions, in which a senior staff person from a Member firm discussed current industry topics with NFA staff in areas relating to risk management, back office operations, trading practices and front office operations. NFA will continue to offer these types of training courses to staff on a regular basis. NFA also established an Office of Professional Development (OPD) as a result of the BRG recommendations. After benchmarking with other regulators, law firms and accounting firms that have similar departments, NFA created the OPD to oversee the training and professional development of NFA's professional staff in the Futures Compliance, Swaps Compliance, Market Regulation and Registration departments Additionally, the BRG report recommended that NFA evaluate its hiring practices to ensure its examiners have diverse skills. Over the past few years, NFA already had begun to modify its hiring philosophy to place greater emphasis on hiring individuals with prior industry and related experience. This effort will continue in the years to come. - Customer asset protection insurance study In an effort to further examine all means of protecting customers, CME Group, Futures Industry Association, the Institute for Financial Markets and NFA jointly commissio false false false true false false false true false true false false false true true true false false false true false false false false false false false false true false false false false false false false false false false false false false false true 122 0 true 374 true false false false false false false X 30 30 false false true false true true true true true false false true true true true true true true true false CA X DAVID HAWRYSZ 3127811300 300 SOUTH RIVERSIDE PLAZA SUITE 18 Chicago IL 60606 Christopher Hehmeyer 1.0 X 16000 0 0 Paul Georgy 1.0 X 16000 0 0 Douglas Bry 1.0 X 8000 0 0 Bruce Cleland 1.0 X 16000 0 0 George Crapple 1.0 X 16000 0 0 Ernest Jaffarian 1.0 X 8000 0 0 John Vassallo 1.0 X 8500 0 0 Gerald Corcoran 1.0 X 8000 0 0 Scott Cordes 1.0 X 8000 0 0 Michael Dawley 1.0 X 12000 0 0 Maureen Downs 1.0 X 8000 0 0 Robert Felker 1.0 X 10500 0 0 Ronald Filler 1.0 X 25500 0 0 William Goetzmann 1.0 X 12000 0 0 Douglas Harris 1.0 X 47500 0 0 Silas Keehn 1.0 X 27500 0 0 Jim Marshall 1.0 X 24000 0 0 Michael Moskow 1.0 X 30500 0 0 Charles Nastro 1.0 X 48675 0 0 Ronald Oppenheimer 1.0 X 27000 0 0 Todd Petzel 1.0 X 45500 0 0 Susan Phillips 1.0 X 44500 0 0 Mark Bagan 1.0 X 10000 0 0 Jeffrey Borchardt 1.0 X 8000 0 0 David Goone 1.0 X 14000 0 0 John Sandner 1.0 X 16000 0 0 Antoine Babule 1.0 X William McCoy 1.0 X James Koutoulas 1.0 X John Roe 1.0 X Jeffrey Malec 1.0 X Robert Burke 1.0 X Philip Olesen 1.0 X Charlotte McLaughlin 1.0 X Don Thompson 1.0 X Andrea Corcoran 1.0 X Michael Schaefer 1.0 X Daniel Roth 40.0 X 598566 0 57205 Daniel Driscoll 40.0 X 442239 0 57938 Thomas Sexton 40.0 X 380262 0 121704 Kenneth Haase 40.0 X 388134 0 58635 Regina Thoele 40.0 X 369193 0 57308 Karen Wuertz 40.0 X 321987 0 112123 David Hawrysz 40.0 X 317570 0 94794 Gregory Prusik 40.0 X 187016 0 52588 Edward Dasso 40.0 X 379683 0 57112 Jamila Piracci 40.0 X 353200 0 68074 Carol Wooding 40.0 X 229633 0 52810 Michael Crowley 40.0 X 220853 0 45802 Ronald Hirst 40.0 X 201241 0 43524 Steven Earl 40.0 X 200706 0 44761 David Kammerer 40.0 X 200402 0 22277 5306360 0 946655 79 false true false Jenner Block LLP 353 N Clark St CHICAGO IL 60654 Legal 2291774 Berkeley Research Group LLC 2200 Powell St Ste 1200 EMERYVILLE CA 94608 Consulting 1963140 Clune Construction Company 10 South LaSalle St Suite 300 CHICAGO IL 60603 Construction 1107932 Evidence Exchange 21 Penn Plaza Ste 1010 NEW YORK NY 10001 Data Filtering 204321 Elijah Ltd 205 W Wacker Dr Ste 1300 CHICAGO IL 60606 Data Filtering 110129 5 0 ASSESSMENT FEES & MARKET SERVICE REV 900099 44002108 44002108 MEMBERSHIP DUES 900099 17097335 17097335 REGISTRATION & TESTING FEES 900099 3515623 3515623 REGULATORY FINES 900099 1652900 1652900 ARBITRATION REVENUE 900099 80564 80564 385183 385183 66733713 426954 0 0 426954 0 0 0 0 0 0 0 0 0 0 67160667 66733713 0 426954 0 0 0 0 3759591 0 27717241 3026300 5635854 2218974 0 4160023 55694 0 0 0 3148029 25350 1026509 1586784 0 3116654 2235308 0 148795 0 0 3495857 0 EDUCATION AND RECRUITMENT 798569 DUES AND SUBSCRIPTIONS 189878 62345410 17287655 25750570 26890441 26939543 0 0 3431829 4040316 0 0 0 0 0 0 0 0 413034 506712 19200156 8827920 10049388 10372236 6694467 8131084 0 0 0 0 0 0 3369391 2726259 68136205 78466720 10874085 9836536 0 0 2295880 8185452 0 0 0 0 0 0 0 0 0 0 4125417 3729886 17295382 21751874 X 50840823 56714846 0 0 0 0 50840823 56714846 68136205 78466720 4815257 1058766 X false true X true false false false false 57362093 31649 31649 31649 true 2784474 2105309 1527959 3361824 false 7192866 2936895 4255971 3856150 1485670 2370480 8151140 4405355 3745785 10372236 0 DEFERRED RENT CREDIT 3729886 3729886 X 68219433 1058766 1058766 67160667 67160667 62345410 62345410 62345410 Agent, Trustee, Custodian, etc. Arrangement Schedule D, Part IV, Line 1b THE COMMODITIES FUTURES TRADING COMMISSION (CFTC) PERIODICALLY ASKS FEDERAL COURTS TO APPOINT NFA TO SERVE AS COURT-APPOINTED MONITOR IN RESTITUION JUDGEMENTS AWARDED IN CFTC CASES BROUGHT BEFORE THE COURTS AS MONITOR, NFA ENSURES HARMED INVESTORS IDENTIFIED BY THE COURT ORDER RECEIVE THEIR PRO-RATA SHARE OF RESTITUTION. THE RESTITUTION MONIES ARE PLACED IN QUALIFIED SETTLEMENT FUNDS (QSF) WHICH ARE SEPARATE LEGAL ENTITIES ESTABLISHED AND TITLED PURSUANT TO A FEDERAL COURT ORDER. QSF ARE ORDINARILY SUBJECT TO THE CONTINUING JURISDICTION OF THE FEDERAL COURT BODY. NFA HAS CHECK WRITING AUTHORITY FOR THE QSF. Liability for Uncertain Tax Position (ASC 740) Schedule D, Part X, Line 2 The Association has received a favorable determination letter from the Internal Revenue Service, stating that they are exempt from federal income taxes under the provisions of Section 501(c)(6) of the Internal Revenue Code of 1986 (IRC), except for income taxes pertaining to unrelated business income. The FASB issued guidance that requires tax effects from uncertain tax positions to be recognized in the financial statements only if the position is more likely than not to be sustained if the position were to be challenged by a taxing authority. Management has determined there are no material uncertain positions that require recognition in the financial statements, and has properly accrued a provision for excise taxes. There is no interest or penalties recognized in the statement of activities or statement of position. The tax years ending 2010, 2011 and 2012 are still open to audit for both federal and state purposes. North America 14 Program Services AUDIT OF MEMBER FIRMS 83408 Central America and the Caribbean 8 Program Services AUDIT OF MEMBER FIRMS 18072 22 22 101480 101480 false false false false false false X true true X X X false false false Daniel Roth 594750 0 0 0 3816 0 35000 0 22205 0 655771 0 0 0 Daniel Driscoll 423915 0 0 0 18324 0 35000 0 22938 0 500177 0 0 0 Thomas Sexton 364179 0 0 0 16083 0 98718 0 22986 0 501966 0 0 0 Kenneth Haase 344912 0 40000 0 3222 0 35000 0 23635 0 446769 0 0 0 Regina Thoele 364635 0 0 0 4558 0 35000 0 22308 0 426501 0 0 0 Karen Wuertz 268584 0 50000 0 3403 0 88871 0 23252 0 434110 0 0 0 David Hawrysz 275339 0 40000 0 2231 0 64719 0 30075 0 412364 0 0 0 Gregory Prusik 155426 0 30000 0 1590 0 24337 0 28251 0 239604 0 0 0 Edward Dasso 323083 0 50000 0 6600 0 35000 0 22112 0 436795 0 0 0 Jamila Piracci 320460 0 30000 0 2740 0 35000 0 33074 0 421274 0 0 0 Carol Wooding 196629 0 32500 0 504 0 22649 0 30161 0 282443 0 0 0 Michael Crowley 205853 0 15000 0 0 0 20721 0 25081 0 266655 0 0 0 Ronald Hirst 196375 0 0 0 4866 0 21482 0 22042 0 244765 0 0 0 Steven Earl 187910 0 7000 0 5796 0 21859 0 22902 0 245467 0 0 0 Jane Croessman 155128 0 5000 0 13800 0 18817 0 24667 0 217412 0 0 0 Toni Rossetti 171957 0 10000 0 300 0 20484 0 9805 0 212546 0 0 0 David Kammerer 183135 0 6000 0 11267 0 21199 0 1078 0 222679 0 0 0 Health or social club dues or initiation fees Schedule J, Part I, Line 1a Health club dues provided to DANIEL ROTH, REGINA THOELE, KAREN WUERTZ, KENNETH HAASE, DAVID HAWRYSZ, EDWARD DASSO AND THOMAS SEXTON, STAFF AND OFFICERS, in the amount of $11,424.00 was reported as compensation on Form W-2. Significant Changes to Governing Documents Form 990, Part VI, Line 4 Since National Futures Association's (NFA) inception, a basic governance tenet has been that all of NFA's constituencies must be fairly and adequately represented on the Board - consistent with statutory and regulatory provisions. Moreover, Section 17(b)(11) of the Commodity Exchange Act requires, in part, that NFA's Board must provide for meaningful representation of a diversity of membership interests. Applying these governance principles, the Board approved at its August 2012 meeting that seven Swap Participants be added to NFA's Board of Directors. Members or Stockholders Form 990, Part VI, Line 6 NFA MEMBERS INCLUDE CERTAIN PERSONS REGISTERED WITH THE COMMODITY FUTURES TRADING COMMISSION ("COMMISSION"); ANY CONTRACT MARKET; AND ANY PERSON DESIGNATED BY COMMISSION RULE AS ELIGIBLE FOR NFA MEMBERSHIP. NFA MEMBERS ARE DIVIDED INTO CATEGORIES BASED UPON THE CATEGORIES IN WHICH THEY ARE REGISTERED WITH THE COMMISSION. THESE CATEGORIES INCLUDE CONTRACT MARKETS; FUTURES COMMISSION MERCHANTS AND LEVERAGED TRANSACTION MERCHANTS; INTRODUCING BROKERS; RETAIL FOREIGN EXCHANGE DEALERS; SWAP DEALERS; MAJOR SWAP PARTICIPANTS; AND COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS. Members or Stockholders Who May Elect Form 990, Part VI, Line 7a Election Process: Because NFA's Directors have staggered terms of office, NFA elects a portion of NFA's Board on the third Tuesday in January. Prior to October 15th preceding the election, NFA's Secretary provides to all Members the names of the elected Directors whose terms will expire at the Annual Election and requests the submission to NFA's Nominating Committee of the names of eligible persons to fill those positions. Before the November 20th preceding the election, the Nominating Committee submits to the Secretary its list of nominees for the elected Board positions, which the Secretary then provides to the Members. Within 21 days of this notification, additional nominations may be made by petition signed by at least 50 Members in the category for which the nominating petition is being filed. After the expiration of the 21-day period, the Secretary provides the Members with the names of all of the nominees. In the event of a contested election in any of the FCM and LTM; IB; or CPO and CTA categories, the Secretary sends written ballots to all Members in that category by December 15. Promptly after the December 31st preceding the election, the Secretary notifies the contract market Members that will be represented on the Board during the current calendar year. If an election is necessary to choose a contract market Member representative (refer to Board composition board description below) the Secretary requests the contract market Members eligible to vote to nominate eligible persons to represent such contract market Members. In the event of a contested election in the contract market category, the Secretary shall cause written ballots to be sent to all contract market Members eligible to vote by January 10. The election results are announced at the Board's Annual meeting held the third Thursday in February and the Directors take their place on the Board. At the Annual Meeting, the Board elects the Public Representatives from nominees made by the Members which the Secretary solicits in advance. Board Composition: The composition of NFA's Board of Directors is - Contract Market Representatives: If there are four or fewer contract market Members having annual transaction volume during the prior calendar year of more than 1,000,000, then one representative of each such contract market Member. If there are more than four contract market Members with annual transaction volume during the prior calendar year of more than 1,000,000, then (a) one representative of each contract market Member ranked in the top three contract market Members based on annual transaction volume during the prior calendar year and one representative of the remaining contract market Members with annual transaction volume during the prior calendar year of more than 1,000,000. Futures Commission Merchant, Leverage Transaction Merchant and Introducing Broker Representatives: Seven representatives of Commission registered Futures Commission Merchant ("FCM") Members, including at least three (3) representatives of FCMs ranked in the top ten FCMs and at least three (3) representatives of FCMs, (not ranked in the top ten FCMs), and Commission registered Leverage Transaction Merchant ("LTM") Members; one representative of Commission registered Introducing Broker ("IB") Members required to maintain minimum adjusted net capital; and one representative of IBs not required to maintain minimum adjusted net capital. One Representative of RFEDs Commodity Pool Operator and Commodity Trading Advisor Representatives: Four representatives of Commission registered Commodity Pool Operator ("CPO") Members and Commission registered commodity trading advisor ("CTA") Members, including at least two (2) representatives of CPOs or CTAs that rank within the top 20 percent of CPOs or CTAs with funds under management allocated to futures. Swap Dealer and Major Swap Participant Representatives: Seven (7) elected representatives of registered or provisionally registered Swap Dealers and registered or provisionally registered Major Swap Participants, divided as follows - At least three (3) representatives of SDs that are Large Financial Institutions, as of June 30 of the prior calendar year. At least three (3) representatives of SDs that are not included in paragraph (d)(i) above, as of June 30 of the prior calendar year. One representative of MSPs: Provided, however, that if there are no persons willing and eligible to be a representative of MSPs, then such MSP representation requirement shall not apply. Public Representatives: (a) Effective as of the 2013 annual meeting of the Board, eleven (11) individuals who are Public Representatives (b) Effective as of the 2014 annual meeting of the Board, twelve (12) Public Representatives (c) Effective as of the 2015 annual meeting of the Board, thirteen (13) Public Representatives (d) Effective as of the 2016 annual meeting of the Board, fourteen (14) Public Representatives. An FCM, LTM, RFED, IB, CTA, CPO, SD or MSP Member and all of its Affiliates shall have no more than one representative on the Board at any one time. Decisions Subject to Approval Form 990, Part VI, Line 7b A CHANGE IN NFA'S ARTICLES OF INCORPORATION ("ARTICLES") REQUIRES APPROVAL BY A MAJORITY OF THOSE VOTING IN EACH MEMBERSHIP CATEGORY. REFER TO SCHEDULE O DESCRIPTION OF PART VI line 6 FOR A DESCRIPTION OF THE MEMBERSHIP CATEGORIES. Form 990 Review Process Form 990, Part VI, Line 11b PRIOR TO FILING THE FORM 990, IT WAS REVIEWED AND APPROVED BY NFA'S AUDIT COMMITTEE (THREE MEMBERS). THE REVIEW INVOLVED AN IN-DEPTH PRESENTATION BY NFA STAFF TO THE COMMITTEE. THE COMMITTEE ALSO REVIEWED THE OVERALL ACCURACY AND COMPLETENESS OF THE 990. PRIOR TO FILING THE FORM 990, THE DRAFT RETURN WAS ALSO PROVIDED TO THE REMAINING VOTING MEMBERS OF NFA'S GOVERNING BODY. NFA'S COO ALSO REVIEWED THE FORM 990 FOR OVERALL ACCURACY AND COMPLETENESS PRIOR TO FILING. Conflict of Interest Policy Monitoring & Enforcement Form 990, Part VI, Line 12c AT NFA'S BOARD OF DIRECTORS ANNUAL MEETING, NFA'S GENERAL COUNSEL PRESENTS, IN WRITING, NFA'S POLICY AND PROCEDURE ON CONFLICTS AND DUALITIES OF INTEREST ("POLICY"). EACH DIRECTOR IS SUBSEQUENTLY REQUIRED TO SIGN A WRITTEN STATEMENT THAT LISTS ANY AFFILIATION THAT MAY GIVE RISE TO POTENTIAL CONFLICTS AND DUALITIES OF INTEREST UNDER THE POLICY. THE WRITTEN STATEMENT ALSO ACKNOWLEDGES THAT THE DIRECTOR HAS RECEIVED, READ AND UNDERSTOOD, AND AGREES TO ABIDE BY NFA'S POLICY; AND THAT THE DIRECTOR AT NFA'S BOARD OF DIRECTORS ANNUAL MEETING, NFA'S GENERAL COUNSEL PRESENTS, IN WRITING, NFA'S POLICY AND PROCEDURE ON CONFLICTS AND DUALITIES OF INTEREST ("POLICY"). EACH DIRECTOR IS SUBSEQUENTLY REQUIRED TO SIGN A WRITTEN STATEMENT THAT LISTS ANY AFFILIATION THAT MAY GIVE RISE TO POTENTIAL CONFLICTS AND DUALITIES OF INTEREST UNDER THE POLICY. THE WRITTEN STATEMENT ALSO ACKNOWLEDGES THAT THE DIRECTOR HAS RECEIVED, READ AND UNDERSTOOD, AND AGREES TO ABIDE BY NFA'S POLICY; AND THAT THE DIRECTOR WILL DISCLOSE, AS IT OCCURS, ANY AFFILIATION THAT MAY GIVE RISE TO A CONFLICT OR DUALITY OF INTEREST UNDER THE POLICY. NFA STAFF REVIEWS AND MAINTAINS THESE WRITTEN STATEMENTS AND REFERS TO THEM AS MATTERS UPON WHICH THE BOARD ACTS ARISE. IF ANY DIRECTOR HAS AN AFFILIATION THAT MAY GIVE RISE TO A CONFLICT OR DUALITY OF INTEREST UNDER THE POLICY IN CONNECTION WITH A MATTER COMING BEFORE THE BOARD, NFA'S GENERAL COUNSEL BRINGS THE AFFILIATION TO THE BOARD'S ATTENTION IN THE EVENT THAT THE DIRECTOR DOES NOT. NFA STAFF IS REQUIRED TO ADHERE TO A CONFLICT OF INTEREST POLICY, WHICH IS MONITORED BY HUMAN RESOURCES. STAFF ANNUALLY COMPLETE THEIR CONFLICT OF INTEREST QUESTIONNAIRES, WHICH HUMAN RESOURCES REVIEWS AND MAINTAINS. IF ANY CONFLICTS ARISE, GENERAL COUNSEL DISCUSS WITH STAFF, AND DOCUMENT ACTIONS TAKEN; WHETHER DISPOSAL OF THE INTEREST OR ANY DISCIPLINARY ACTION UNDER THE CODE OF PROFESSIONAL CONDUCT IS WARRANTED DEPENDING ON LEVEL OF CONFLICT UNDER REVIEW. Process for Determining Compensation Form 990, Part VI, Lines 15a & 15b The Compensation committee is comprised of three voting members of the board. For all officers except the CEO, the CEO collaborates with the compensation committee to determine the remaining officers' compensation. The CEO and the compensation committee discuss each officer's contribution to the organization; they review comparable market data provided by NFA's human resource department and deliberate compensation recommendations which are documented and presented to the Executive Committee. The same method, as described above, is used in determining the CEO's compensation, only the CEO is not part of the process. The Executive Committee reviews the compensation committee's proposed recommendation and either accepts or adjusts the proposal. The Executive Committee then makes their recommendation to the Board of Directors. The Board of Directors either approves or modifies the Executive Committee's recommendation. The Board then approves final compensation for officers. The organization contemporaneously documents and maintains recordkeeping for deliberations and decisions regarding the compensation arrangements of the officers. Compensation is reported on a calendar year basis and its major components include base salary and performance bonuses. Additionally, The Association also participates in the purchase of life insurance on behalf of certain executive officers (Executives) as part of the National Futures Association split-dollar life insurance plan (the Split-Dollar Plan). The purpose of the Split-Dollar Plan is to provide participating Executives with an insured death benefit during employment and after retirement. The insurance policy also allows for capital accumulation through the buildup of cash value. Upon termination of employment, death or maturity of the policy, the Association receives cash value equal to the cumulative premium paid by the Association and the policyholder has a paid up life insurance policy. The following officers currently have policies: Karen Wuertz vests in September 2013 and the expected cash surrender value of her policy is $158,000; David Hawrysz vests September 2015 and the expected cash surrender value of his policy is $107,000; Thomas Sexton vests September 2016 and the expected cash surrender value of his policy is $225,000. How Documents are Made Available to the Public Form 990, Part VI, Line 19 THE ORGANIZATION MAKES GOVERNING DOCUMENTS AND FINANCIAL STATEMENTS AVAILABLE ON ITS WEBSITE OR UPON WRITTEN REQUEST. CONFLICTS OF INTEREST POLICY AVAILABLE UPON REQUEST.