NFA President Thomas W. Sexton III described the self-regulatory organization's ("SRO") approach to derivatives industry regulation.
In a speech at the Association for Financial Markets in Europe Annual Compliance and Legal Conference, Mr. Sexton reviewed the history of the NFA and its successful approach to self-regulation. Mr. Sexton highlighted "effective government oversight" that was not "oppressive," mandatory membership, and the commitment of industry leaders to the ideal of self-regulation.
Mr. Sexton described how the NFA "evolved" to meet new regulatory challenges. He offered two examples. First, the NFA was "aggressive" in its enforcement activity in response to the prevalence of fraud in the largely unregulated retail forex market that developed in the nineties. Second, the NFA established a swap dealer regulatory oversight program following the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Mr. Sexton stated that the NFA's international coordination efforts allow it to perform examinations of non-U.S. swap dealers and strengthen global regulators' efforts to deal with market crises.
Mr. Sexton also noted current regulatory challenges including:
a lack of regulatory authority over spot market virtual currency products, such as verifying Members' ownership and control; and
cybersecurity risks, such as ensuring the secureness of NFA technology systems and protecting NFA Member data.