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April 8, 2015
Bylaw 1101 guidance for pools which investment management authority has been delegated pursuant to CFTC No-Action Letters 14-69 and/or 14-126 and related BASIC display changes
In 2014, the CFTC's Division of Swap Dealer and Intermediary Oversight ("DSIO") issued No-Action Letters 14-69 and 14-126 setting forth the criteria for seeking streamlined registration no-action relief for commodity pool operators ("CPOs") that delegate certain of their responsibilities as a CPO to another person who is registered as a CPO. Since this relief is self-executing, NFA is not notified of the delegation and is not able to provide this information on NFA's BASIC system. As a result, Members conducting Bylaw 1101 due diligence on a particular pool are not always able to confirm through NFA's BASIC system that the CPO of a particular pool is an NFA Member or exempt from such requirement.
In order to notify NFA that a CPO has been delegated investment management authority over a particular pool and to ensure that NFA's BASIC system reflects the delegation, CPOs are now required to answer the following question in NFA's EasyFile system when filing a pool's annual financial statement:
When a CPO answers "Yes" to the above question, NFA's BASIC system will automatically reflect the fund as a "Delegated Pool" of the CPO. When conducting a search for a pool in BASIC, the CPO that has answered "Yes" to the above question for the pool will appear in the "Operator Name" field as illustrated below.
If the operator name on this screen does not agree with the information available to the Member conducting the search, it's possible that the investment management authority for this pool has been delegated to the CPO listed under the "Operator Name" field. By clicking on the CPO listed for the pool, the BASIC Details page will display, including a section on Exemptions and No Actions as illustrated below.
Upon selecting "View Exemptions and No Actions," the Member conducting the search will be able to determine whether the listed CPO has been delegated investment management authority for the particular pool as illustrated below:
If the pool is listed under "Delegated Pools," the Member will generally have satisfied its Bylaw 1101 obligations. If the pool is not listed, the Member must conduct additional due diligence to ensure compliance with Bylaw 1101.
At this time, CPOs can only inform NFA of delegated pools through the annual financial statement filing. NFA is actively working on providing CPOs with an alternative method to inform NFA of delegated pools in instances for which an annual financial statement is not required. We will inform Members once an alternative method is available.
If you have any questions, please contact Mary McHenry, Associate Director, Compliance (email@example.com or 312-781-1420) or Tracey Hunt, Associate Director, Compliance (firstname.lastname@example.org or 312-781-1284).