Investment Fund Law Blog
Do I need to register as a CPO or CTA with the CFTC/NFA?
Commodity Pool Operator (“CPO”)
A CPO is an individual or organization which operates or solicits funds for a commodity pool (i.e., an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts, options on futures, or retail off-exchange forex contracts, or to invest in another commodity pool). A CPO must register with the CFTC and become a member of the NFA unless an exemption from registration is available.
Private funds will typically rely on the CFTC Rule 4.13(a)(3) exemption, which is available to funds that engage in limited futures activity.
CFTC Rule 4.13(a)(3). A private fund will be exempt from registration under CFTC Rule 4.13(a)(3) only if it limits its futures positions so as to satisfy one of the following two tests:
- The aggregate initial margin and premiums required to establish such positions, determined at the time the most recent position was established, will not exceed 5 percent of the liquidation value of the fund’s portfolio, after taking into account unrealized profits and unrealized losses on any such positions it has entered into; or
- The aggregate net notional value of such positions, determined at the time the most recent position was established, does not exceed 100 percent of the liquidation value of the fund’s portfolio, after taking into account unrealized profits and unrealized losses on any such positions it has entered into.
Investment advisers who rely on Rule 4.13(a)(3) exemption must file a notice of exemption with the National Futures Association and affirm the exemption annually within 60 days after the end of the calendar year.
On February 2012, the CFTC rescinded Rule 4.13(a)(4) exemption, which provided exemption to private funds offered only to institutional qualified eligible purchasers (“QEP”) and natural persons that meet QEP requirements that hold more than the de minimis amount of commodity interests.
Commodity Trading Advisor (“CTA”)
A CTA is an individual or organization which, for compensation or profit, advises others as to the value of or the advisability of buying or selling futures contracts, options on futures, or retail off-exchange forex contracts. A CTA will be exempt from registration if:
- it is registered as a CPO and its commodity trading advice is directed solely to, and for the sole use of, the pool or pools for which it is so registered;
- it is exempt from registration as a CPO and its commodity trading advice is directed solely to, and for the sole use of, the pool or pools for which it is so exempt; or
- during the course of the preceding 12 months, it has not furnished commodity trading advice to more than 15 persons and it does not hold itself out generally to the public as a CTA.
How do I register as a CPO or CTA with the CFTC/NFA?
Commodity Pool Operator (“CPO”)
A CPO registers with the CFTC and becomes a member of the NFA by filing the following::
- A completed online Form 7-R
- An application fee of $200.00
- CPO Membership Dues of $750.00
A CPO is required to file the following in relation to its “principals” and “associated persons”:
- A completed online Form 8-R
- Fingerprint cards
- A Principal Application Fee of $85.00
- An Associated Person Application Fee of $85.00
Principals and associated persons of a CPO are generally required to have passed the Series 3 National Commodity Futures Examination.
Commodity Trading Advisor (“CTA”)
A CTA registers with the CFTC and becomes a member of the NFA by filing the following:
- A completed online Form 7-R
- An application fee of $200.00
- CTA Membership Dues, if applicable, of $750.00
A CTA is required to file the following in relation to its “principals” and “associated persons”:
- A completed online Form 8-R
- Fingerprint cards
- A Principal Application Fee of $85.00
- An Associated Person Application Fee of $85.00
Principals and associated persons of a CTA are generally required to have passed the Series 3 National Commodity Futures Examination.
Do I need to register as a CPO or CTA with the CFTC/NFA?
Commodity Pool Operator (“CPO”)
A CPO is an individual or organization which operates or solicits funds for a commodity pool (i.e., an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts, options on futures, or retail off-exchange forex contracts, or to invest in another commodity pool). A CPO must register with the CFTC and become a member of the NFA unless an exemption from registration is available.
Private funds will typically rely on the CFTC Rule 4.13(a)(3) exemption, which is available to funds that engage in limited futures activity.
CFTC Rule 4.13(a)(3). A private fund will be exempt from registration under CFTC Rule 4.13(a)(3) only if it limits its futures positions so as to satisfy one of the following two tests:
- The aggregate initial margin and premiums required to establish such positions, determined at the time the most recent position was established, will not exceed 5 percent of the liquidation value of the fund’s portfolio, after taking into account unrealized profits and unrealized losses on any such positions it has entered into; or
- The aggregate net notional value of such positions, determined at the time the most recent position was established, does not exceed 100 percent of the liquidation value of the fund’s portfolio, after taking into account unrealized profits and unrealized losses on any such positions it has entered into.
Investment advisers who rely on Rule 4.13(a)(3) exemption must file a notice of exemption with the National Futures Association and affirm the exemption annually within 60 days after the end of the calendar year.
On February 2012, the CFTC rescinded Rule 4.13(a)(4) exemption, which provided exemption to private funds offered only to institutional qualified eligible purchasers (“QEP”) and natural persons that meet QEP requirements that hold more than the de minimis amount of commodity interests.
Commodity Trading Advisor (“CTA”)
A CTA is an individual or organization which, for compensation or profit, advises others as to the value of or the advisability of buying or selling futures contracts, options on futures, or retail off-exchange forex contracts. A CTA will be exempt from registration if:
- it is registered as a CPO and its commodity trading advice is directed solely to, and for the sole use of, the pool or pools for which it is so registered;
- it is exempt from registration as a CPO and its commodity trading advice is directed solely to, and for the sole use of, the pool or pools for which it is so exempt; or
- during the course of the preceding 12 months, it has not furnished commodity trading advice to more than 15 persons and it does not hold itself out generally to the public as a CTA.
How do I register as a CPO or CTA with the CFTC/NFA?
Commodity Pool Operator (“CPO”)
A CPO registers with the CFTC and becomes a member of the NFA by filing the following::
- A completed online Form 7-R
- An application fee of $200.00
- CPO Membership Dues of $750.00
A CPO is required to file the following in relation to its “principals” and “associated persons”:
- A completed online Form 8-R
- Fingerprint cards
- A Principal Application Fee of $85.00
- An Associated Person Application Fee of $85.00
Principals and associated persons of a CPO are generally required to have passed the Series 3 National Commodity Futures Examination.
Commodity Trading Advisor (“CTA”)
A CTA registers with the CFTC and becomes a member of the NFA by filing the following:
- A completed online Form 7-R
- An application fee of $200.00
- CTA Membership Dues, if applicable, of $750.00
A CTA is required to file the following in relation to its “principals” and “associated persons”:
- A completed online Form 8-R
- Fingerprint cards
- A Principal Application Fee of $85.00
- An Associated Person Application Fee of $85.00
Principals and associated persons of a CTA are generally required to have passed the Series 3 National Commodity Futures Examination.