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Given the current market volatility, NFA released a Notice to Members reminding CPOs of their notice filing requirements under Compliance Rule 2-50 and the related Interpretive Notice. Under Rule 2-50, each CPO must promptly notify NFA (no later than 17:00 CT of the next business day) in the following circumstances:
- CPO Member operates a commodity pool that is unable to meet margin call(s)
- CPO Member operates a commodity pool that is unable to satisfy redemption requests in accordance with its subscription agreements
- CPO Member operates a commodity pool that has hated redemptions and the halt on redemptions is not associated with pre-existing gates or lock-ups, or a pre-planned cessation of operations
- CPO Member receives notice from a swap counterparty that a pool the CPO Member operates is in default.
This rule is designed to ensure that CPO Members notify NFA as soon as possible of potential financial issues that may impact the CPO’s ability to fulfil its obligations to pool participants.
There are some circumstances where it is deemed reasonable for a CPO not to file notice with NFA even though they technically fall within one of the above categories. As an example, a CPO may halt redemptions as part of the liquidation process to facilitate the final accounting of the pool(s)’ books and records. The CPO is not required to file notice for its pool(s) in this scenario, providing this occurs in the normal course of business – not due to a market or unexpected and does not otherwise violate the terms outlined in the offering documents.
Notice is submitted through NFA’s EasyFile system.
