Quick Answer
The promotional-material rule bars misleading, deceptive, or high-pressure communications and any material misstatement, omission, or fraudulent performance claim. Past performance shown must be accurate, hypothetical results must carry the prescribed cautionary disclaimer, and testimonials must be representative and disclose if paid. Members review material before use and keep records.
The National Futures Association (NFA) sets a single promotional-material standard for communications with the public, and it turns on one idea: nothing a firm shows a prospective customer may mislead them.
The No-Misleading-Claims Standard
The rule covers advertising and sales material used across the futures industry.
- The NFA's promotional-material rule governs communications with the public by Futures Commission Merchants (FCMs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), and Commodity Trading Advisors (CTAs). Its core prohibition: promotional material may not be misleading, deceptive, or high-pressure, may not contain a material misstatement or omission, and may not make fraudulent or misleading performance claims.
- Past performance shown to the public must be accurate and not misleading. A firm cannot cherry-pick winning accounts or imply that results are guaranteed or typical when they are not.
Exam Tip: Gotchas
- Past performance cannot be cherry-picked. Showing only the profitable accounts, or dressing results up as guaranteed, violates the rule even if every number displayed is technically real. Selective presentation is still misleading.
Hypothetical Performance and Testimonials
Two kinds of claims get specific extra safeguards.
- Hypothetical performance results (results not actually achieved with real money) must carry the prescribed cautionary disclaimer warning that hypothetical results have inherent limitations and were prepared with the benefit of hindsight. The Member must also be able to demonstrate the basis for those results.
- Testimonials must be representative of what customers generally experience, must state that a testimonial is not indicative of future performance, and must disclose if the testimonial is paid.
Think of it this way: hypothetical results are what a strategy would have made on paper, arranged after the fact when you already know how the market moved. Because hindsight makes any plan look smart, the rule forces a plain warning so a prospect does not mistake a paper backtest for real trading profits.
Exam Tip: Gotchas
- Hypothetical results always need the cautionary disclaimer. They were built with hindsight, so a Member must flag their inherent limitations and be ready to show how they were calculated. Presenting hypothetical results as if they were actual trading gains is a violation.
- A paid testimonial must say it is paid, and no testimonial can promise future results. A glowing but paid endorsement that hides the payment, or that implies the customer's results are typical, breaks the rule.
Supervisory Review and Recordkeeping
The rule also puts the firm on the hook for policing its own material.
- Each Member must adopt and enforce written procedures to supervise its Associates' use of promotional material, have qualified personnel review promotional material before it is used, and retain records of that material (including, for hypothetical results, the records showing how they were calculated).
Exam Tip: Gotchas
- Promotional material is reviewed before use, not after complaints. Qualified personnel approve material in advance, and the firm keeps written supervisory procedures and records. A choice that waits for a problem before reviewing material is wrong.