CPO and CTA Members: Educational resources, common deficiencies and other important regulatory information

On an ongoing basis, each NFA Member is required to update its Member Questionnaire in the event of a material change to its operations. For example, if a Member begins doing business or a pool commences operations, the Member must immediately update its Member Questionnaire. Every firm should carefully review the Member Questionnaire to ensure it accurately reflects current business operations. This will ensure that NFA's BASIC system displays correct information about the firm's business activities and that the firm receives all applicable notices relating to its reporting requirements in a timely manner. Members should also review the Member Questionnaire templates, which include all possible and available questions in the filing.

NFA Members must annually review their operations using NFA's Self-Examination Questionnaire. This questionnaire is designed to aid Members in recognizing potential problem areas and to alert them to procedures that need to be revised or strengthened. Common deficiencies in this area include failing to review the questionnaire on an annual basis and failing to maintain evidence that a review was conducted. NFA also encounters firms with deficient policies and procedures, indicating an inadequate review of the Self-Examination Questionnaire. Thorough questionnaire completion and review ensures firms are alerted to deficient policies and procedures that should be updated to comply with NFA Rules.

Members that outsource regulatory functions must adopt and implement a written supervisory framework over those functions to mitigate outsourcing-related risks pursuant to Interpretive Notice 9079. The supervisory framework must address activities the firm will undertake with respect to initial risk assessment, onboarding due diligence, ongoing monitoring, termination and recordkeeping. Appendix E of the Self-Examination Questionnaire includes several questions intended to help Members understand these requirements. Firms must also maintain records demonstrating that they have addressed the items outlined in the Interpretive Notice and are following their procedures.

CPO and CTA Members must adopt a written information systems security program (ISSP) pursuant to Interpretive Notice 9070 to address the risk of unauthorized access to or attack of their information technology systems and to establish an appropriate response should unauthorized attacks occur. Members are also required to notify NFA of certain cybersecurity incidents related to their commodity interest activities via NFA's Cyber Notice Filing System. One common deficiency in this area is failure to provide cybersecurity training to employees upon hiring and annually thereafter.

Members that fail to establish and implement an ISSP may be subject to disciplinary action.

CPO Members who operate pools pursuant to CFTC Regulation 4.7 must file notice of claim for exemption with NFA prior to the offer or sale of participation in the exempt pool, if the claimed relief includes that provided under 4.7(b)(1). If the relief claimed is limited to that provided under 4.7(b)(2), (3) or (4), however, the notice of claim for relief must be submitted to NFA before the pool first enters into a commodity interest transaction.

CTA Members who want to avail themselves of the relief available in CFTC Regulation 4.7, with respect to qualified eligible persons, must file the notice of claim for exemption before the Member enters into an agreement to direct or guide the customer's commodity interest account.

Updates to CFTC Regulation 4.7 became effective in November 2024. CPOs of 4.7 exempt Fund of Funds may choose to prepare and distribute monthly participant statements within 45 days of month-end. CPOs and CTAs were required to comply with the increased portfolio requirement thresholds in CFTC Regulation 4.7(a) by March 26, 2025.

If a Member fails to have at least one principal that is registered as an associated person, NFA shall deem that Member's failure to be a request to withdraw from NFA membership pursuant to NFA Bylaw 301.

Notice Filing Requirements: CPOs are required to file notice with NFA when a market or other event affects a commodity pool's ability to fulfill its participant obligations. Notice must be filed by 5:00 p.m. CT the next business day following one of the events outlined in Compliance Rule 2-50 and/or Interpretive Notice 9080.

Changes in Fiscal Year End: If a CPO elects a fiscal year end other than the calendar year end for a pool, it must give written notice of the election to all participants and file the notice with NFA via EasyFile pursuant to NFA Compliance Rule 2-13 within 90 calendar days after the pool's formation. If this notice is not given, the CPO will be deemed to have elected the calendar year end as the pool's fiscal year end. The CPO must continue to use the elected fiscal year end for the pool unless it provides written notice of any proposed change to all participants and files such notice with NFA via EasyFile at least 90 days before the change.

Changes in Certified Public Accountant (CPA): In the event that a CPO changes the independent CPA engaged to audit a pool's financial statements, the CPO must file notice with NFA via EasyFile pursuant to NFA Compliance Rule 2-13 which incorporates CFTC Regulation 4.22(d)(1)  no more than 15 days after the CPA's resignation or dismissal by the CPO.

Extension Requests: If a CPO requests an extension to file an annual pool financial statement, the extension must be filed with NFA via EasyFile prior to the due date of the filing.

With few exceptions, each CPO Member must distribute an Annual Report, certified by an independent public accountant, to pool participants within 90 days of the pool's fiscal year end or the permanent cessation of trading, whichever is earlier. Each CPO must also report to NFA on a quarterly basis specific information about the firm and the pools it operates. These pool quarterly reports (PQR) are due within 60 days of each calendar quarter end. Each PQR filed after its due date will be subject to a late filing fee of $200 for each business day it is late.

CTA Members that direct trading of commodity interests are required to file a quarterly CTA Form PR report within 45 days of the quarter end. Each Form PR report filed after its due date will be subject to a late filing fee of $200 for each business day it is late. CTAs that commence trading client accounts during a quarter must update the Member Questionnaire immediately to receive timely reporting notifications.

As a reminder, NFA views late filings as a serious rule violation, and repeated late filings may result in disciplinary action.

A CPO Member who operates an umbrella-series structure (i.e., a single legal entity that has several distinct sub-funds which, in effect, are traded as individual funds) needs to list the umbrella entity with NFA through the Member Questionnaire and mark it as such. CPOs may also identify the series funds that are tied to that umbrella through the questionnaire. Exemptions must be claimed at the umbrella level and must apply to the structure as a whole.

CPOs should take special care when establishing relationships in the Member Questionnaire between master funds and feeder funds, umbrella funds and series, registered investment companies (RIC) and controlled foreign corporations (CFC), and parent pools and trading subsidiaries. See the Member Questionnaire User Guide for assistance.

With few exceptions, CPO Members must distribute monthly or quarterly account statements to pool participants within 30 days of month or quarter-end. See CPO Reporting Requirements for details.

Pursuant to NFA Interpretive Notice 9029, CTA Members placing bunched orders must analyze each trading program at least quarterly to ensure that the order allocation method has been fair and equitable and document this analysis.