Before working with any person or firm to trade in commodity futures, commodity pools, options, forex, or other derivatives, verify that the entity is properly registered with the CFTC. The Commodity Exchange Act requires certain firms and individuals to be registered with the CFTC. Registration and examination of intermediaries is conducted on behalf of the CFTC by the National Futures Association (NFA) under the supervision of the CFTC.
Do a Check
Visit the NFA BASIC database to check:
- Registration
- Disciplinary or regulatory history
- Financial information
First Things First
Verify the registration status and disciplinary history of the person or firm selling a product or strategy before researching the risks or potential returns of the trade itself.
While registration and a clean disciplinary record won’t protect you from fraud, most scams involve unregistered entities, people, and products.
For more information, review the frequently asked questions and answers below.
Registration FAQs
The Commodity Exchange Act generally requires intermediaries in the derivatives industry to register with the CFTC. An “intermediary” is a person or firm who acts on behalf of another person in connection with trading futures, swaps, or options. Depending on the nature of their activities, they may also be subject to various financial, disclosure, reporting, and recordkeeping requirements. Intermediaries include:
Commodity Pool Operators (CPO)
Commodity Trading Advisors (CTA)
Futures Commission Merchants (FCM)
Principals
Retail Foreign Exchange Dealers (RFED)
Registration indicates:
- Principals and associated persons have completed thorough background checks.
- The firm meets certain financial requirements.
- Addresses and contact information for the primary place of business and branch locations are verified and accessible to customers.
- The firm or persons must submit to examinations and regulatory supervision.
- Associated persons have passed required tests and meet other proficiency requirements.
- The firm or person must adhere to disclosure requirements and conduct standards.
If problems arise, customers can seek help through the CFTC Reparations Program or NFA arbitration process.
Some firms or individuals may be exempt from registration or may not be regulated by the CFTC. In some cases, such persons appear in the NFA BASIC database with an indication of the basis for the exemption. If the firm or person cannot be found in the NFA BASIC database, ask them why. You may need to check with other regulatory agencies depending on the product or service offered (see “Are there other regulatory agencies I could check?” below).
Be cautious of unregistered firms or individuals when participating in products or markets that historically have seen a large number of fraud complaints — these include commodity pools, precious metals, binary options, forex, or digital currencies. Keep in mind that if you lose money to fraud or other bad practices, you are less likely to be protected if you do business with entities that are not registered with the CFTC.
Watch out for other warning signs of fraud, including:
- Limited time offers. You’re pressured to act quickly because time is running out.
- Promises of easy money. Derivatives products are generally considered high-risk. There are no guarantees or secret formulas, and past performance is no indication of future success.
- Obscure or complex strategies. Don’t buy into products or strategies you don’t completely understand. Know exactly how the product or strategy makes money, how it could lose money, how similar strategies have worked in the past, what fees or other costs you will pay, and consider the consequences of losing your investment.
- Extraordinary claims. Fraudsters will often claim to be experts, market geniuses, or super wealthy because they have cracked the secrets to market success. If they have traded on Wall Street, they likely have been registered in the past. Check. Don’t believe claims you cannot independently verify, and don’t spend money on advice from unregistered advisors or brokers.
Submit a tip to the CFTC. If you believe an unregistered entity or individual is attempting to commit fraud, or has committed fraud, the information you provide could help save others from being victimized.
Products that use virtual currencies as the underlying commodity are regulated by the CFTC. Intermediaries that advise clients regarding virtual currency commodity futures or that facilitate trading in those instruments must be registered with the CFTC and NFA.
Websites or companies that offer customers the ability to purchase or trade virtual currencies on the cash or spot market are not required to be registered with the CFTC. However, the CFTC maintains general anti-fraud and manipulation enforcement authority over virtual currency cash markets.
Digital currency spot market trading companies are considered money service businesses (MSB) by the U.S. Treasury and must be registered with Financial Crimes Enforcement Network (FinCEN). Many states also require virtual currency trading websites to register as money transfer companies. Check the MSB Registrant Search to see if the digital currency trading company you plan to use is registered with FinCEN. Also check the Nationwide Multistate Licensing System (NMLS) to see if the company is registered in your state (click search results for a detailed view). The NMLS is operated by the Conference of State Bank Supervisors.
Registration with FinCEN and the NMLS will indicate:
- The company follows federal anti-money laundering regulations.
- Where the company is headquartered.
- The company is subject to federal and state laws.
You also may be able to file complaints with your state banking regulator if needed. Keep in mind that you may have no protections if you choose an unregistered, offshore company.
Yes. The table below provides links to agencies you can check when researching other investment or financial services professionals or companies:
| What to check | Where to check |
|---|---|
| Investment adviser firms |
The SEC Investment Adviser Public Disclosure website. The SEC Action Lookup for formal actions the SEC has brought against individuals. Your state securities regulator. Visit the North American Securities Administrators Association (NASAA) for contact information. |
| Broker dealers |
Your state securities regulator. Visit the North American Securities Administrators Association (NASAA) for contact information. |
| Unregistered entities that claim to be registered and soliciting investors in the U.S. |
CFTC Registration Deficiency (ReD) List. SEC Public Alert: Unregistered Soliciting Entities (PAUSE) List. |
| Insurance products |
Your state insurance regulator. Visit the National Association of Insurance Commissioners (NAIC) for contact information. |
| Consumer financial products and services | Consumer Financial Protection Bureau. |
If you live in the United States, foreign entities that solicit you to trade are generally required to register with the CFTC; however, some non-U.S. firms are exempt from registration.
You may have fewer protections if you choose to trade with a company that is not registered with the CFTC and that operates offshore, and resolution of any issues or problems may require consulting foreign counsel.