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Introduction

The provisions of Section 4p(b) of the Commodity Exchange Act ("Act") (7 U.S.C. 6p(b) (1994)) set forth requirement regarding training of Registrants as to their responsibilities to the public. This section of the Act requires the Commodity Futures Trading Commission ("CFTC") to issue regulations requiring new Registrants to attend ethics training sessions within six months of registration, and all Registrants to attend such training on a periodic basis. The CFTC, in its "Statement of Acceptable Practices", states: "The awareness and maintenance of professional ethical standards are essential elements of a Registrant’s fitness. Further, the use of ethics training programs is relevant to a Registrant’s maintenance of adequate supervision, a requirement under Rule 166.3".

The Statement of Acceptable Practices is intended to serve as a "safe harbor" concerning acceptable procedures for Intermediaries regarding fitness and supervision. The Statement of Acceptable Practices lists the following topics to be addressed in training programs for this purpose:

1. An explanation of the applicable laws and regulations, and the rules of self-regulatory organizations or contract markets and registered derivatives transaction execution facilities;
2. The Registrant’s obligation to the public to observe just and equitable principles of trade;
3. How to act honestly and fairly and with due skill, care and diligence in the best interest of customers and the integrity of the markets;
4. How to establish effective supervisory systems and internal controls;
5. Obtaining and assessing the financial situation and investment experience of customers;
6. Disclosure of material information to customers;
7. Avoidance, proper disclosure and handling of conflicts of interest.

Exchange Analytics Initial Ethics Program

The topics in the CFTC’s Statement of Acceptable Practices are addressed in our Initial ethics training program. Exchange Analytics was originally authorized to provide ethics training by the Commodity Futures Trading Commission in 1995, and at that time our programs had to address the same basic topics. While our program has been updated, we have made sure that these topics are covered. The program usually takes 2-3 hours average time to complete.

The outline for our course is as follows:

1. Introduction
   1. Reason for taking the course
   2. How the course will work (the case study approach)
2. Module 1 - Topics include ethics, governmental jurisdiction, self-regulation, and supervisory responsibility
3. Module 2 - Topics include new accounts, risk disclosure, suitability, high pressure sales, documentation, and customers’ money
4. Module 3 - Topics include order executions, allocation, errors, discretion, recommendations, churning, manipulation, and margin calls
5. Module 4 - This last section will consist of four case studies incorporating the following topics:

1. Case Study 1 - Trade allocation, bunched orders, supervisory responsibilities, and money laundering issues
2. Case Study 2 - Registration, promotional materials, electronics communications (web sites and emails), and disclosure issues
3. Case Study 3 - Promotional material, customer account (opening, documentation) and disclosure issues, suitability, the necessity to act honesty and in good faith, high-pressure sales issues and supervisory responsibilities
4. Case Study 4 - Manipulation, order execution, and supervisory responsibilities

Exchange Analytics’ Periodic Ethics Training Outline

Introduction

The provisions of Section 4p(b) of the Commodity Exchange Act ("Act") (7 U.S.C. 6p(b) (1994)) set forth requirements regarding training of Registrants as to their responsibilities to the public. This section of the Act requires the Commodity Futures Trading Commission ("CFTC") to issue regulations requiring new Registrants to attend ethics training sessions within six months of registration, and all Registrants to attend such training on a periodic basis. The CFTC, in its "Statement of Acceptable Practices", states: "The awareness and maintenance of professional ethical standards are essential elements of a Registrant’s fitness. Further, the use of ethics training programs is relevant to a Registrant’s maintenance of adequate supervision, a requirement under Rule 166.3".

The Statement of Acceptable Practices is intended to serve as a "safe harbor" concerning acceptable procedures for Intermediaries regarding fitness and supervision. The Statement of Acceptable Practices lists the following topics to be addressed in training programs for this purpose:

1. An explanation of the applicable laws and regulations, and the rules of self-regulatory organizations or contract markets and registered derivatives transaction execution facilities;
2. The Registrant’s obligation to the public to observe just and equitable principles of trade;
3. How to act honestly and fairly and with due skill, care and diligence in the best interest of customers and the integrity of the markets;
4. How to establish effective supervisory systems and internal controls;
5. Obtaining and assessing the financial situation and investment experience of customers;
6. Disclosure of material information to customers;
7. Avoidance, proper disclosure and handling of conflicts of interest.

Exchange Analytics’ Periodic Ethics Program

All topics required by the CFTC’s Statement of Acceptable Practices are addressed in Exchange Analytics’ Periodic ethics training program. This Periodic course is considered to be a "refresher" course, whereby certain timely topics are explored. Exchange Analytics was originally authorized to provide ethics training by the Commodity Futures Trading Commission in 1995.

The program is designed to take about 60 minutes to complete.

The course outline is as follows:

1. Introduction
   1. Instructions on Course Navigation
   2. Discussion of the objectives of the course and reason for taking it
   3. How the course will work (the case study approach)
   4. Refresher quiz on knowledge of the industry and it’s regulatory structureM=
2. Case 1 - Topics include registration, risk disclosure, promotional materials and customer testimonials.
3. Case 2 - Topics include suitability, risk disclosure, treating customers fairly and honestly, obtaining necessary customer information, misrepresentation, and high-pressure sales.
4. Case 3 - Topics include discretion, trade allocation, bunched orders, supervisory responsibilities, wash trades and money laundering issues.
5. Case 4 - Topics include disclosure of customer orders, pre-arranged and block trading, pre-execution discussions, market manipulation.

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