Yesterday the NFA issued a notice to persons that are currently relying on exemptions or exclusions from registration as a Commodity Pool Operator or Commodity Trading Advisor. The notice explains that certain exemptions and exclusions must be “affirmed” on an annual basis via the NFA’s online Exemption System. The first annual affirmation is due within the first 60 days after December 31, 2012. Exemptions that are not affirmed within this period will be automatically withdrawn. The NFA notice also contains a number of FAQs.
We have reprinted the notice below.
Notice to Members I-12-30
December 3, 2012
Guidance on the Annual Affirmation Requirement for those Entities that are currently operating under an exemption or exclusion from CPO or CTA registration
In February 2012, the CFTC issued final rules that now require any person that claims an exemption or exclusion from CPO registration under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or an exemption from CTA registration under 4.14(a)(8) to annually affirm the applicable notice of exemption or exclusion within 60 days of the calendar year end. The first notice affirming these exemptions is due for the calendar year ending December 31, 2012 and annually thereafter. Failure to affirm any of the above exemptions or exclusions will be deemed as a request to withdraw the exemption or exclusion and therefore, result in the automatic withdrawal of the exemption or exclusion once the 60 day period has elapsed.
How to complete the affirmation process
Starting on December 3, 2012, any person or entity that claims an exemption or exclusion under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or 4.14(a)(8) will be able to complete the affirmation process by accessing NFA’s Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML.
Once logged into the system, you will be directed to the Exemption Index, which lists all Firm Level (at the top) and Pool Level (at the bottom) exemptions on file with NFA. Exemptions requiring affirmation will be identified with an icon in the ‘Affirm’ column. After clicking
on the icon, a pop-up box will appear requesting affirmation that the exemption continues to be effective. By clicking ‘OK’, the current date will replace the ‘Affirm’ icon and effectively complete the affirmation requirement for the given exemption for the year. The same process must be completed for each and every exemption on file that requires affirmation.
Failure to affirm an active exemption or exclusion from CPO or CTA registration will result in the exemption/exclusion being withdrawn after the 60 day period has ended. For registered CPOs or CTAs, withdrawal of the exemption/exclusion will result in the firm being subject to Part 4 Requirements for that pool regardless of whether the firm otherwise remains eligible for the exemption/exclusion. For non-registrants, the withdrawal of the exemption may subject you to enforcement action by the CFTC.
Frequently Asked Questions for Exemptions
How often will I need to affirm my exemptions?
You will need to affirm each applicable exemption on an annual basis, within 60 days after December 31. NFA will provide an annual email reminder of the affirmation process. The email reminder will be sent to the email contact on file in NFA’s Exemption System. In order to ensure that your firm receives NFA’s annual reminder, you must ensure a current email address has been provided in NFA’s Exemption System. If the contact information changes during the year, firms are urged to promptly update this information.
What if NFA records reflect an exemption for a pool that is no longer active?
A registered CPO can update NFA’s records with the applicable information. The CPO must first withdraw the exemption by accessing NFA’s Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. At the time you withdraw the exemption, you will be directed to the Annual Questionnaire to delete or cease the pool.
A non-registered entity must notify NFA with specific information about the pool by sending written notification to Exemptions@nfa.futures.org. The written notification should include the full name of the entity and the pool.
If I can no longer qualify for an exemption or exclusion from CPO or CTA registration, what should I do?
If you do not affirm the applicable exemption or exclusion within the 60 day period, it will be automatically withdrawn. As a result, in order to continue to operate the pool, you may be required to be registered as a CPO and/or CTA and be an NFA Member. You can apply for registration and NFA membership in NFA’s Online Registration System (ORS), which is available on NFA’s website. For assistance in the process, NFA has a number of video tutorials available at http://www.nfa.futures.org/NFA-registration/videos/index.HTML.
I currently operate pools exempt under 4.13(a)(3), but I will no longer meet the requirements of this exemption as of January 1, 2013. I understand that NFA currently offers certain entities the ability to pre-register as a CPO, which allows a firm to defer registration until that date. Is this available to entities that operate pools exempt under 4.13(a)(3)?
No, the pre-registration option is not available to entities operating 4.13(a)(3) pools. It is only available to entities operating pools that are exempt under 4.13(a)(4), 4.5, CPO 12-03 No-Action, or 4.13 No Action.
How will firms that I do business with know that I have completed the Affirmation Process?
Once an entity affirms the applicable exemptions, NFA’s BASIC System will reflect the affirmation date for each exemption held. Further, BASIC will also reflect a withdrawal date if the exemption is not affirmed in the required 60-day period.
If I currently conduct business with an exempt CPO or CTA, how do I ensure that these entities have properly affirmed their exemptions in order to satisfy my Bylaw 1101 requirements?
NFA’s BASIC System will reflect whether an exemption held by a particular CPO or CTA has been successfully affirmed by including an affirmation date. A withdrawal date will be reflected for any exemption that was not affirmed for a given CPO or CTA. NFA has also provided Members with access to a spreadsheet that includes a list of all entities that have exemptions on file with NFA that must be affirmed on an annual basis. This spreadsheet can be found in the Member’s Annual Questionnaire at http://www.nfa.futures.org/NFA-electronic-filings/annual-questionnaire.HTML. Once logged in, you will see a link to a spreadsheet which is updated nightly. The spreadsheet will include all entities with an exemption(s) that requires affirmation, as well as the affirmation date, if applicable. If the spreadsheet does not reflect an affirmation date, the exemption has not been affirmed.
Any questions regarding these processes should be directed to:
Susan Koprowski, Manager, Compliance (email@example.com or 312-781-1288) or
Michael Mason, Manager, Compliance (firstname.lastname@example.org or 312-781-1447).
You are receiving this message because you are either a Member of National Futures Association (NFA) or you subscribed to the email subscription list on NFA’s Website. Additionally, you may be receiving this message because NFA records indicate you previously filed notice of exemption from CPO or CTA registration. To cancel or change your subscription at any time, visit the Email Subscriptions page on our Website at http://www.nfa.futures.org/news/subscribe.asp.
Cole-Frieman & Mallon LLP provides legal services to CFTC registered firms and NFA member firms. Bart Mallon can be reached directly at 415-868-5345.