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January 15, 2020
Member obligations under NFA Bylaw 1101 and Compliance Rule 2-36(d) with respect to CPOs/CTAs exempt from registration
The CFTC requires any person that claims an exemption from CPO registration under CFTC Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5), an exclusion from CPO registration under CFTC Regulation 4.5 or an exemption from CTA registration under 4.14(a)(8) (collectively, exemption) to annually affirm the applicable notice of exemption within 60 days of the calendar year end. Persons that fail to file the affirmation notice by March 2, 2020, will be deemed to have requested a withdrawal of the exemption and, therefore, may be required to be registered and NFA Members.
Since exempt CPOs/CTAs have until March 2, 2020, to complete the affirmation process, NFA recognizes that it may be difficult for a Member to conclusively determine prior to that date whether a previously exempt CPO/CTA continues to be eligible for a current exemption.
Therefore, Members that take reasonable steps to determine the registration and membership status of these previously exempt persons will not be in violation of NFA Bylaw 1101 or Compliance Rule 2-36(d) if, between January 1 and April 1, 2020, they transact customer business with a previously exempt person that fails to become registered and an NFA Member, file a notice affirming its exemption from CPO/CTA registration, or provide a written representation as to why the person is not required to register or file the notice affirming the exemption.
How to identify whether an exempt CPO/CTA has affirmed its exemption
Members should compare their list of exempt CPO/CTAs with which the Member transacts customer business to the information NFA makes available to assist Members in determining whether an exempt CPO/CTA has affirmed its exemption(s).
Members can review exemption information in two ways. Members can view individual persons or entities by navigating to NFA's BASIC System, opening the person or entity's record, and clicking 'View All' in the Firm Exemptions box and/or the Pools & Pool Exemptions box. The Firm Exemptions page and/or the Pools & Pool Exemptions page will reflect an affirmation date if an exempt person or entity has properly filed a notice affirming an exemption, if applicable, or a withdrawal date if the person or entity has withdrawn the exemption.
Alternatively, Members can access a spreadsheet that includes a list of all persons or entities that have exemptions on file with NFA that must be affirmed on an annual basis. This spreadsheet, which is updated nightly, can be found in the Member's Annual Questionnaire, which can be accessed by logging into the system. The spreadsheet includes all persons or entities with an exemption(s) that requires an annual affirmation, as well as the most recent affirmation date, if applicable, and the affirmation due date. If the affirmation due date is March 2, 2020, the exemption has not yet been affirmed. Once the exemption has been affirmed, the affirmation due date will change to March 1, 2021.
Expectations for Members transacting customer business with an exempt CPO/CTA that has not affirmed its exemption
NFA expects any Member transacting customer business with a person that previously claimed an exemption from CPO/CTA registration under the regulations listed above, and that has not filed a notice in NFA's Exemption System affirming the exemption, not filed a notice of exemption for another available exemption, or not properly registered and become an NFA Member by December 31, 2019, to promptly contact the person to determine whether the person intends to file a notice affirming the exemption.
If the Member learns that the person does not intend to file a notice affirming the exemption, or the person does not file a notice affirming the exemption by March 2, 2020, then the Member must promptly obtain a written representation as to why the person is not required to register or file a notice of exemption, and evaluate whether the representation appears adequate. If the Member determines that this written representation is inadequate and the person is required to be registered, then the Member must put a plan in place (e.g., liquidation-only trades) to cease transacting customer business with the person or risk violating NFA Bylaw 1101 or Compliance Rule 2-36(d).
Any Member that acts in accordance with the information provided in this Notice will not be charged with violating NFA Bylaw 1101 or Compliance Rule 2-36(d). Members should be aware, however, that this Notice does not relieve their regulatory obligations pursuant to the Commodity Exchange Act and the CFTC's Regulations.
If you have any questions, please contact NFA's Information Center (312-781-1410 or 800-621-3570 or firstname.lastname@example.org).