The Commodity Futures Modernization Act of 2000 (CFMA) lifted the ban on trading security futures, specifically single-stock and narrow-based stock index futures. Security futures are regulated both as securities and as future contracts, and must be traded on trading facilities and through intermediaries registered with both the SEC and CFTC.
Security futures involve a high degree of risk and are not suitable for all investors. The possibility exists that your customers holding security futures could lose a substantial amount of money in a very short period of time because security futures are highly leveraged. The amount they could lose is potentially unlimited and can exceed the amount they originally deposited with your firm.
There are no trading strategies that can eliminate the risk in security futures. Strategies using combinations of positions, such as spreads, may be as risky as outright long or short futures positions. Trading in security futures requires knowledge of both the securities and futures markets.
Continuing Education (CE) Requirements
The CFMA requires FINRA and the National Futures Association (NFA) to develop proficiency requirements related to security futures products. FINRA requires any registered securities or futures professionals who intend to engage in a securities futures business to complete a Firm Element continuing education program covering security futures.
FINRA and the NFA, in partnership with the Institute for Financial Markets, have developed a Web-based, Firm Element continuing education program focusing on essential information that should be known by persons who offer and sell security futures and those who supervise such persons. Learn more about security futures training requirements.
In addition, firms should be aware that adding a securities futures business may constitute a material change of business. This would require a firm to file a continuing membership application and obtain prior approval from FINRA before engaging in a security futures business.
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|Access to Security Futures Training||Tool / Resource||02-11-2015|
|Regulatory Notice 12-41|
FINRA Amends the TAF Rate for Transactions in Covered Security Futures
|Register Notice 10-51|
Sales Practice Obligations for Commodity Futures-Linked Securities
|Information Notice- 9/7/10|
August 2010 Supplement to the Security Futures Risk Disclosure Statement
|Supplement to the Security Futures Risk Disclosure Statement||Document||08-01-2010|
|Regulatory Notice 09-33|
SEC Approval and Effective Date for New Consolidated FINRA Rules
|Regulatory Notice 09-06|
FINRA Requests Comment on Proposed Rule to Establish a Leverage Limitation for Retail Forex
|Regulatory Notice 08-78|
FINRA Announces SEC Approval and Effective Date for New Consolidated FINRA Rules Relating to Warrants, Options and Security Futures
|Notice to Members 06-63|
Amendments to Registration Rules Extending the Date by which Eligible Registrants must Complete Continuing Education Program before Engaging in Security Futures Activities;
|Notice to Members 03-16|
SEC Approves New Rule and Rule Amendments Concerning Audit Trail and Trading Halt Requirements for ATSs that Trade Security Futures
|Notice to Members 02-73|
SEC Approves New Rules and Rule Amendments Concerning Security Futures;
|Security Futures Brochure||Document||10-01-2002|
|NASD, NFA Announce Joint Launch of Web-based Proficiency Training for Security Futures Products||News Release||09-03-2002|
|Training Requirements: Security Futures Firm-Element Continuing Education||Industry||09-03-2002|
|Security Futures—Know Your Risks, or Risk Your Future||Investor||09-03-2002|
|Content Outline for Security Futures Firm-Element Continuing Education||Industry||09-03-2002|