Frequently asked questions

Federal financial-markets regulation in the United States is divided primarily between two agencies: the Securities and Exchange Commission (SEC) regulates securities markets under the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Commodity Futures Trading Commission (CFTC) regulates derivatives, futures, and swaps under the Commodity Exchange Act. Self-regulatory organizations — FINRA for broker-dealers and the NFA for futures industry members — operate under federal oversight and enforce industry conduct rules. State securities regulators also play a role under their respective blue-sky laws.

The SEC regulates securities markets — stocks, bonds, investment funds, securities-based derivatives, and the firms that intermediate transactions in them. The CFTC regulates derivatives markets — futures, swaps, options on futures, and certain retail commodity transactions. The line between the two agencies has narrowed over time, particularly after Dodd-Frank brought swaps under shared jurisdiction (7 U.S.C. § 1a; 15 U.S.C. § 78c). Where a product has features of both, the agencies have entered into Memoranda of Understanding to clarify oversight.

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization registered with the SEC under Section 15A of the Exchange Act. It oversees broker-dealers and their associated persons — examining firms, enforcing trading rules, administering qualification examinations (Series 7, 24, 63, and others), and operating the FINRA Dispute Resolution Services arbitration forum. FINRA rules are enforceable against members under FINRA Rule 2010, which requires “high standards of commercial honor and just and equitable principles of trade.”

The National Futures Association (NFA) is the self-regulatory organization for the U.S. futures and derivatives industry. It registers futures commission merchants, introducing brokers, commodity pool operators, commodity trading advisors, and their associated persons, and enforces rules of conduct including NFA Compliance Rule 2-9 (supervisory obligations) and NFA Compliance Rule 2-29 (communications with the public). NFA operates under CFTC oversight, parallel to FINRA’s role under SEC oversight.

FINRA Rule 2111 requires that a broker-dealer’s recommendation be suitable for the customer in light of the customer’s investment profile. Regulation Best Interest, adopted by the SEC in 2019 with a June 2020 compliance date, established a heightened standard for recommendations to retail customers: under Rule 15l-1, the broker-dealer must act in the retail customer’s best interest and may not place its own interest ahead of the customer’s. Reg BI implements this through four component obligations — disclosure, care, conflict of interest, and compliance. The two rules divide by customer type. Reg BI applies only to retail customers; FINRA Rule 2111 continues to govern recommendations to non-retail customers. For retail recommendations covered by Reg BI, FINRA has stated in Regulatory Notice 20-18 that compliance with Reg BI’s Care Obligation satisfies the suitability rule.

FINRA Rule 3110 requires broker-dealer firms to establish and maintain a written supervisory system reasonably designed to achieve compliance with applicable rules. FINRA Rule 3120 requires annual testing and verification of supervisory controls. NFA Compliance Rule 2-9 imposes parallel obligations on futures firms. Failure to supervise is an independent ground for enforcement against the firm and against individual supervisors, separate from any underlying misconduct.

SEC Rules 17a-3 and 17a-4 require broker-dealers to make and preserve specified records of customer accounts, transactions, communications, and supervisory activities — generally for three to six years depending on the record type. FINRA Rules 4511 and 4512 reinforce these obligations and add detail on retention and storage. Comparable requirements apply to futures industry members under CFTC Regulations 1.31, 1.35, and 1.36.

The Bank Secrecy Act (31 U.S.C. § 5311 et seq.) requires broker-dealers and futures commission merchants to maintain anti-money-laundering programs, including customer identification, transaction monitoring, and reporting of suspicious activity. FINRA Rule 3310 and NFA Compliance Rule 2-9(c) implement these requirements at the SRO level. A Suspicious Activity Report (SAR) must be filed within 30 days of detecting a suspicious transaction of $5,000 or more under 31 C.F.R. § 1023.320 (broker-dealers) and 31 C.F.R. § 1026.320 (FCMs and introducing brokers).

FINRA Dispute Resolution Services (FINRA DRS) is a forum for resolving disputes between customers and broker-dealers, and between members and associated persons. Customer-firm disputes are subject to mandatory arbitration under the customer agreement and FINRA Rule 12200. Industry disputes — employment, expungement, partnership disputes between brokers and firms — are governed by the Industry Code (Rule 13000 series). FINRA arbitration awards are final and binding, subject to limited vacatur grounds under the Federal Arbitration Act.

Yes, with limits. The Federal Arbitration Act (9 U.S.C. § 1 et seq.) and Supreme Court decisions including Shearson/American Express v. McMahon (1987) and AT&T Mobility v. Concepcion (2011) broadly enforce pre-dispute arbitration agreements in securities customer contracts, including class-action waivers. FINRA’s rules require customer agreements to comply with specified disclosure standards under Rule 2268. Statutory exceptions exist for certain employment matters — notably sexual harassment claims under the EFAA (9 U.S.C. § 402).

A Wells notice is a formal letter from SEC or CFTC enforcement staff informing the recipient that staff intends to recommend that the Commission authorize enforcement action. It gives the recipient an opportunity to submit a written response (a “Wells submission”) arguing why enforcement should not be brought. Receiving a Wells notice does not mean charges will follow, but it is a serious development that warrants immediate counsel. Similar notice processes exist at FINRA (described in Regulatory Notice 09-17 and the Rule 9200 series) and the NFA.

Under the Sarbanes-Oxley Act, private actions for securities fraud under Section 10(b) and Rule 10b-5 must be brought within the earlier of two years after the discovery of the facts constituting the violation or five years after the violation itself (28 U.S.C. § 1658(b)). SEC enforcement actions for fraud are generally subject to a five-year limitations period under 28 U.S.C. § 2462 (Kokesh v. SEC, 581 U.S. 455 (2017)). The National Defense Authorization Act for FY 2021 (Pub. L. 116-283, § 6501) extended the limitations period for fraud-based disgorgement to ten years.

A financial markets expert witness provides specialized opinion testimony on technical or industry-specific matters at issue in litigation or arbitration. Common engagement areas include industry custom and practice (how reasonable firms conduct business), suitability of recommendations, supervisory adequacy, damages calculations, and market structure or manipulation analysis. Expert opinions are admissible in U.S. federal court under Federal Rule of Evidence 702 and the Daubert/Kumho Tire standards, and similar standards apply in most state courts and arbitral forums.

Daubert v. Merrell Dow Pharmaceuticals (1993) established that federal trial courts act as “gatekeepers” for expert testimony, ensuring that proposed expert opinions are based on reliable principles and methods reliably applied to the facts of the case. Daubert factors include testability, peer review, error rates, general acceptance, and methodology. The 2023 amendments to Fed. R. Evid. 702 reinforced the proponent’s burden to show admissibility by a preponderance of the evidence. Many state courts apply Daubert; others apply the older Frye “general acceptance” standard.

There is no universal credentialing standard, but courts and arbitrators look for relevant industry experience (typically fifteen-plus years), substantive knowledge of the specific subject matter (e.g., FINRA arbitration, broker-dealer compliance, derivatives trading), prior testimony experience, and absence of disqualifying conflicts. Many qualified experts hold securities or futures industry licenses (current or expired), have served in compliance or supervisory roles at major firms, or have been retained as expert witnesses in multiple prior matters before the same type of tribunal.

Domestic expert engagements typically arise in U.S. federal or state court litigation, FINRA arbitration, NFA arbitration, or AAA proceedings, and follow the Federal Rules of Evidence and procedural rules of the forum. International engagements may arise before the London Court of International Arbitration (LCIA), the International Chamber of Commerce, the Singapore International Arbitration Centre, or foreign courts (e.g., the Federal Court of Australia, the High Court of England and Wales), and follow the procedural rules of the relevant tribunal and the IBA Rules on the Taking of Evidence. Substantive principles often translate across jurisdictions for industry custom and supervisory standards, but procedural and evidentiary frameworks differ significantly.

Federal whistleblower programs have non-exclusive but coordinated jurisdiction. Conduct that involves both securities and futures violations — for example, spoofing across asset classes — may qualify under both the SEC program (15 U.S.C. § 78u-6) and the CFTC program (7 U.S.C. § 26). Counsel typically file with each program for which the conduct potentially qualifies, with cross-references in each submission. The DOJ Criminal Division’s 2024 Corporate Whistleblower Awards Pilot Program is structured to fill gaps in the other programs — a whistleblower is not eligible for a DOJ award if the conduct would have qualified for an award from the SEC, CFTC, or FinCEN program. Concurrent reporting preserves all options.

The DOJ Corporate Whistleblower Awards Pilot Program, launched August 2024 and expanded in May 2025, addresses corporate-misconduct categories not covered by other federal whistleblower programs. The original categories are financial-institution crimes outside FinCEN’s program, foreign corruption outside the SEC’s program (including FCPA and Foreign Extortion Prevention Act violations not involving issuers), domestic corruption involving companies, and federal health care offenses (no longer limited to private insurers as of the May 2025 update). The May 2025 revisions added six further areas: cartels and transnational criminal organizations, federal immigration violations, material support of terrorism, sanctions offenses, trade/tariff/customs fraud, and procurement fraud. If the conduct would also qualify under the SEC, CFTC, or FinCEN program, those programs apply and the DOJ pilot does not. Awards are discretionary, with eligibility requiring a successful prosecution that includes criminal or civil forfeiture exceeding $1 million.

Four federal anti-retaliation provisions apply to financial-markets whistleblowers. Dodd-Frank Section 922 (15 U.S.C. § 78u-6(h)) protects those who report to the SEC, with a private right of action for double back pay, reinstatement, and litigation costs. Following Digital Realty Trust, Inc. v. Somers, 583 U.S. 149 (2018), this provision does not extend to those who report solely internally. Sarbanes-Oxley Section 806 (18 U.S.C. § 1514A) protects employees of publicly traded companies who report violations, including internal reporting, with remedies first through OSHA. The CFTC anti-retaliation provision (7 U.S.C. § 26(h)) parallels Dodd-Frank’s SEC provision. The FinCEN provision (31 U.S.C. § 5323(g)) applies to BSA and OFAC violations.

All four federal financial-markets whistleblower programs — SEC, CFTC, FinCEN, and the DOJ Criminal Division pilot — permit anonymous submission, but only when the whistleblower is represented by counsel. The attorney’s name and contact information must be provided to the agency at the time of submission. The agency may require disclosure of the whistleblower’s identity at some point during the investigation, and identity must be disclosed before any award is paid. Each program agrees not to publicly disclose information that would reveal a whistleblower’s identity except as required by law or judicial process.

Spoofing is bidding or offering with the intent to cancel the bid or offer before execution. In U.S. derivatives markets, it is specifically prohibited under Section 4c(a)(5)(C) of the Commodity Exchange Act, added by Dodd-Frank in 2010. The first criminal spoofing conviction was United States v. Coscia, 866 F.3d 782 (7th Cir. 2017). In securities markets, spoofing is addressed under Section 9(a) of the Exchange Act and Rule 10b-5. The key element is intent to cancel — order cancellation in response to changing market conditions is not spoofing. The line between aggressive market-making and prohibited spoofing is fact-intensive and often the central issue in enforcement defense.

The FX Global Code is a non-binding code of conduct for the wholesale foreign exchange market, developed by the Global Foreign Exchange Committee with the involvement of major central banks including the Federal Reserve. First published in May 2017, and subsequently revised, the Code articulates principles for ethics, governance, execution, information sharing, risk management, and confirmation and settlement. The Code is not directly enforceable as U.S. law; market participants sign Statements of Commitment on a “comply or explain” basis. However, adherence to or departure from Code principles is referenced in enforcement actions, particularly those addressing communication standards, conflicts of interest, and execution practices.

The CFTC’s anti-manipulation framework rests on two complementary rules. CFTC Rule 180.1 implements Section 6(c)(1) of the Commodity Exchange Act, prohibiting any manipulative or deceptive device or contrivance in connection with any swap, contract of sale, or contract for future delivery — modeled on Section 10(b) of the Exchange Act. CFTC Rule 180.2 implements Section 6(c)(3) of the CEA, the standalone anti-manipulation provision, and articulates the elements of a manipulation claim. Section 4c(a)(5)(C) of the CEA adds the specific spoofing prohibition. Together, these provisions cover the spectrum of price-distorting conduct in U.S. derivatives markets.

Most account liquidation disputes in futures and foreign exchange markets are resolved through NFA arbitration under the NFA Code of Arbitration, with the FCM and the customer as the typical parties. Disputes often involve whether margin calls were properly issued, whether the timing of liquidation was reasonable, whether executions during liquidation occurred at proper prices, and whether prior commercial relationships excused strict application of margin rules. CFTC Regulation 1.55 governs risk disclosure at account opening. Customer-FCM arbitration awards are subject to limited grounds for vacatur under Section 10 of the Federal Arbitration Act.

Prediction markets — exchanges on which participants trade event contracts contingent on the outcomes of future events — are regulated by the CFTC under the Commodity Exchange Act as either Designated Contract Markets or under no-action letters. Whether the CEA’s grant of exclusive federal jurisdiction preempts state gambling laws as applied to event contracts is the central contested question, with federal courts split and Supreme Court review widely expected within one to two years. As of May 2026, principal U.S. operators include Kalshi, Polymarket US, PredictIt, Gemini Titan, and LedgerX/MIAX, with combined monthly trading volume in the billions. The CFTC’s Division of Enforcement has identified prediction-market insider trading as a top enforcement priority while signaling that the private bar will be expected to bring manipulation cases under the CEA’s Section 22 private right of action where the Commission does not pursue them. A separate multi-state litigation campaign is testing customer-side loss recovery under state-law descendants of the 1710 Statute of Anne. For a comprehensive treatment, see the Prediction Markets topic resource.