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Notice I-13-26

September 26, 2013

Effective Date of Amendments to NFA Compliance Rule 2-45 and its Related Interpretive Notice

NFA Compliance Rule 2-45 and its related Interpretive Notice entitled Prohibition of Loans by Commodity Pools to CPOs and Affiliated Entities prohibit a Member CPO from permitting a commodity pool to use any means to make a direct or indirect loan or advance of pool assets to the CPO or any other affiliated person or entity. Effective September 13, 2013, NFA amended Compliance Rule 2-45 and the related Interpretive Notice to provide that certain specified transactions are not prohibited by Compliance Rule 2-45.

As a result of the CFTC's recent changes to the Part 4 Requirements, a number of fund operators that were previously exempt from CPO registration have been required to register. Certain of these newly registered CPOs have funds that, in the normal course of business, regularly engage in transactions that have characteristics similar to a loan, but which NFA has determined are not the type of transactions that Compliance Rule 2-45 was intended to prohibit. Therefore, NFA amended the Rule and the Interpretive Notice to provide that a CPO operating a pool that is a registered investment company (RIC), business development company (BDC), exempt pursuant to CFTC Regulation 4.7 or 4.13(a)(3), excluded from registration pursuant to Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 or securities registered under the Securities Act of 1933 may, under certain circumstances, engage in certain specified transactions without violating the Rule. A full description of the specific circumstances and transactions is provided in the following Interpretive Notice: http://www.nfa.futures.org/nfamanual/NFAManual.aspx?RuleID=9062&Section=9. Briefly, the transactions include:

  • Certain Securities Borrowings/Securities Loans;
  • Securities Loans for Cash Financing;
  • Guarantee Obligations;
  • Repurchase Agreements and Reverse Repurchase Agreements;
  • Tax Related Distributions; and
  • Transactions Permitted by the Investment Company Act of 1940 and its Exemptive Rules; and Exemptive Orders issued by the SEC and No-Action Letters Issued by SEC Staff under Sections 17 and 57 of the ICA (limited to a CPO operating a pool that is a RIC or BDC).

Questions regarding these amendments should be directed to Tracey Hunt, Associate Director, Compliance (thunt@nfa.futures.org or 312-781-1284) or Mary McHenry, Associate Director, Compliance (mmchenry@nfa.futures.org or 312-781-1420).

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