Response Due to NFA by February 14, 2012
CPOs providing advice to commodity pools which used MF Global (MFG) as a FCM have faced a number of issues after the bankruptcy. As the NFA announced shortly after the bankruptcy, CPOs were responsible for alerting investors in the commodity pool about the bankruptcy and related issues. Some CPOs also had to implement certain liquidty type provisions including potentially creating reserves and/or side-pocketing the MFG assets. Now, the NFA is requesting further information from CPOs with respect to their dealings with MFG. Most notably, the NFA reminds CPOs that they are required to update their fund disclosure documents before soliciting new investors if they had assets at MFG.
The NFA notice is reprinted in full below. For information on disclosure document reporting for CTAs who had assets at MFG, please see our previous post CTA Guidance re: MFG.
For more of our thoughts on the MFG bankruptcy, please see our post on Managed Futures Regulation Post-MFG.
If you are a CPO that needs help updating your disclosure documents or help with the annual CPO questionnaire, please contact us to discuss.
February 3, 2012
CPOs with Pool Assets Held with MF Global, Inc.
FOR COMMODITY POOL OPERATORS – A RESPONSE IS REQUIRED FROM ALL MEMBERS IN THIS CATEGORY
The bankruptcy proceeding initiated on October 31, 2011 involving MF Global, Inc. (“MFG”), have affected a number of CPOs, as well as the pools they operate. Any CPO with pool(s) affected by this event should have given notice to the current participants of each affected pool regarding the valuation of the assets held at MF Global, Inc. and any withdrawal restrictions that were implemented. Further, any CPOs that have or intend to solicit new participants in a pool affected by the MFG bankruptcy proceeding must update the affected pool’s disclosure document to disclose any material information regarding this event.
In light of these circumstances, NFA is requiring every CPO Member to inform NFA whether
it had any pools (not including 4.13 exempt pools) affected by the MFG bankruptcy proceeding by answering the first question on NFA’s Firm and DR Information Questionnaire: http://www.nfa.futures.org/NFA-electronic-filings/annual-questionnaire.HTML. Those CPOs operating any pool(s) that were affected by the MFG bankruptcy proceeding are required to answer the Special Request Questions for each affected pool, which appear at the top of the CPO Questionnaire.
CPOs must complete the applicable sections of the questionnaire by February 14, 2012. Please note that if the CPO’s annual questionnaire has come due, the CPO must complete the entire questionnaire, including the information requested above, for each pool. If you have any questions, please do not hesitate to contact any of the following individuals:
Susan Koprowski, Compliance Manager, at (312) 781-1288 or at firstname.lastname@example.org
Kaitlan Chi, Compliance Manager, at (312) 781-1219 or at email@example.com
Mary McHenry, Senior Manager, at (312) 781-1420 or at firstname.lastname@example.org
Cole-Frieman & Mallon LLP provides fund formation advice to CPOs and provides managed futures compliance and regulatory support to both CPOs and CTAs. Bart Mallon can be reached directly at 415-868-5345.