On August 14, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 20-28 that included an updated Security Futures Risk Disclosure Statement (the “2020 Statement”). The uniform Security Futures Risk Disclosure Statement (the “Statement”) was jointly developed by FINRA, the National Futures Association (NFA) and several other self-regulatory organizations. The Statement is composed of nine sections and discusses the characteristics and risks of standardized security futures contracts traded on regulated US exchanges.
The 2020 Statement updates: (1) the introductory section of the Statement to reflect that exchanges may now list security futures on certain debt securities; (2) Section 2.7 of the Statement to reflect a shift to the S&P 500 as the benchmark against which to assess serious market volatility and a decrease in the threshold percentage declines that trigger a trading halt to 7, 13 and 20 percent; and (3) Section 8.2 of the Statement to reflect the current terms of CFTC Regulation 41.25 and Rule 17.02(b)(2) that increase the default position limits, modify the criteria for setting a higher position limit and position accountability level, and adjust the time during which position limits must be in effect and the time by which firms must submit Form 102 to the CFTC and the exchange on which the reportable position exists.
FINRA also issued a supplement (the “2020 Supplement”) that reflects the disclosure updates described above. The implementation date of the 2020 Statement and 2020 Supplement is September 14. Firms may elect to use the 2020 Statement and 2020 Supplement prior to the implementation date.