July Housekeeping, Reminders & Updates

Written by: Mark E. Ruddy, Esq. Maria Fielding National Futures Association (“NFA”) Proposes Virtual Currency Activities Disclosure Requirements NFA submitted an Interpretive Notice to the Commodity Futures Trading Commission (“CFTC”) regarding virtual currency disclosure requirements. Due to the unique nature of virtual currency activities, NFA has determined that customers may not fully understand the nature of and potential risks involved in virtual currency activities. In the notice, NFA also reminds Members of Compliance Rule 2-29, which prohibits the use of any promotional material that is misleading or deceptive; something Members should also consider when drafting virtual currency disclosure materials. Details on the specific proposed disclosure requirements can be found in the Disclosure Requirements for NFA Members Engaging in Virtual Currency Activities Interpretive Notice. CFTC Suggests Security Futures Products (“SFPs”) Rule Update On July 24, 2018, the CFTC released an announcement proposing the update of an outdated 2001 security futures rule in order for exchanges to add greater discretion in setting limit levels. The proposal advises increasing the default level of equity SFP position limits as well as modifying the criteria which sets a higher level of position limits and position accountability levels. Public comments concerning the proposal should be submitted electronically through the CFTC’s Comment Online process and all comments will be posted on the CFTC’s website. Comments will be accepted until 60 days after the proposal’s publication in the Federal Register. For the full press release concerning the rule update proposal, see CFTC Press Release 7762-18. CFTC Expands Derivatives Clearing Organizations (“DCOs”) for Customer Funds On July 19, 2018, the CFTC approved an order to allow DCOs to invest customer euro cash in French and German sovereign debt in addition to the present procedure of just holding the euro cash in commercial banks. The CFTC asserts that investing the French and German sovereign debt presents less risk than the traditional commercial bank method. Further details about the order can be found in CFTC Press Release 7759-18. CFTC Issues Customer Advisory Regarding Digital Tokens On July 16, 2018, the CFTC issued a Customer Advisory recommending customers be cautious and perform extensive research when purchasing digital tokens. The advisory emphasizes using caution especially when promised or guaranteed future value of the digital coins or tokens. In the advisory, the CFTC acknowledges that the market in this area, due to its infancy, currently lacks a universal standard for assigning value to these digital coins and tokens, which can add to the uncertainty of the digital coin or tokens’ future value. Another aspect to note when dealing with the purchase of digital coins and tokens is they can be considered either securities or derivatives and commodities, depending on how they are structured. The Advisory is entitled: Use Caution When Buying Digital Coins or Tokens. For further information about any of the topics covered, please feel free to contact Ruddy Gregory, PLLC (www.ruddylaw.com) or 202-797-0762.

July Housekeeping, Reminders & Updates

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