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From the end of June, commodity pool operators must inform NFA of potential financial issues. Compliance Rule 2-50 and a related Interpretive Notice 9080 (Compliance Rule 2-50: CPO Notice Filing Requirements) were announced by the NFA on April 13.
Compliance Rule 2-50 and the respective Interpretive Notice require commodity pool operators (CPOs) to file a notice with NFA when a market event or other event affects a commodity pool’s ability to fulfill its participant obligations.
NFA already has notification requirements in place for futures commission merchants (FCMs) and introducing brokers (IBs), so Compliance Rule 2-50 and its related Interpretive Notice are intended to function as similar requirements to CPO Members and the pools operated – to mandate that CPOs notify NFA of potential financial issues that may impact the ability to fulfill obligations to pool participants or which may lead to a pool’s unplanned liquidation.
The specific events stipulated in Compliance Rule 2-50 which would call for CPO Members to promptly notify NFA are:
- if a CPO operates a pool that cannot meet its margin call(s)
- if a CPO operates a pool that is unable to satisfy redemption requests in accordance with its subscription agreements
- if a CPO operates a pool that has halted redemptions (not related to existing gates or lockups, or a pre-planned cessation of operations)
- if a CPO receives notice from a swap counterparty that a pool it operates is in default.
Interpretive Notice 9080 further defines each of the above listed events.
While NFA is expected to provide further guidance in regard to the manner of these notice filings, now is a great time for member firms to review their compliance procedures in light of their operations and potentially modify their procedures in anticipation of the new compliance rule.
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Please get in touch for support related to new Compliance Rule 2-50 and Interpretive Notice 9080. As part of our US team of compliance consultants we have NFA specialists who can guide you through what’s needed.
