Notices to Members

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Notice I-19-31

December 18, 2019

Effective Date for Amendments to NFA Requirements Related to CTA Performance Reporting and Disclosures

NFA Compliance Rule 2-34 and the related Interpretive Notice entitled CTA Performance Reporting and Disclosures establish performance reporting and disclosure requirements for commodity trading advisor (CTA) Members. NFA recently amended these requirements. These amendments will become effective on February 1, 2020 and accomplish the following:

  • Expand the written confirmation requirement to apply to clients with an account with actual funds that exceed the agreed-upon nominal account size (currently this requirement only applies to partially-funded accounts);

  • Require that written confirmations for qualified eligible persons (QEP) include an explanation of how cash additions, cash withdrawals and net performance affect nominal account size (currently this requirement only applies to non-QEP accounts);

  • Clarify that monthly performance returns must be summed rather than compounded when calculating annual rates of return (ROR), peak-to-valley draw-down percentages and net lifetime RORs for programs where net performance does not affect the nominal account size; and

  • Clarify when it may not be appropriate to include certain accounts in a composite performance capsule, even though the accounts appear to meet the materiality test.

CTAs will not be required to obtain or provide amended written confirmations to existing QEP clients solely to provide information on how cash additions, cash withdrawals and net performance affect nominal account size. However, if a CTA or QEP client amends an existing confirmation for other reasons, the CTA must ensure that the amended confirmation must include this information.

More information on these amendments is available in the August 29, 2019 submission letter to the CFTC. If you have any questions regarding these amendments, please contact Mary McHenry, Associate Director, Compliance (312-781-1420 or mmchenry@nfa.futures.org) or Kaitlan Chi, Manager II, Compliance (312-781-1219 or kchi@nfa.futures.org).

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