May 26, 2020

NFA Issues COVID-19 Alert on Business Continuity Plans, Relief for Branch Office Requirements and Reminder on Upcoming Deadline for CTA-PR Filing Relief

On March 4, 2020, the National Futures Association (the “NFA”) issued a notice to its members addressing concerns surrounding the coronavirus (COVID-19). With the coronavirus’s potential to interfere with members’ regulatory requirements and disturb their day-to-day operations, the NFA provided assurance that it, and the CFTC, will remain practical and flexible in working with members as issues arise.

  • The NFA encouraged members to ensure that any business continuity plans (“BCP”) are up-to-date and adequately equipped to handle a pandemic. NFA Compliance Rule 2-38 and NFA Interpretive Notice 0952 requires all members to maintain a BCP. The NFA requires members to submit the name and contact information for their designated disaster recovery contacts, whom the NFA can contact in the event of an emergency.

  • The NFA requested members to contact the staff with any questions, concerns or needs regarding regulatory relief.

  • Document your activities under your BCP related to COVID-19. We anticipate the staff will want to review your actions during your next exam.

Annual Pool Financial Statements and Other Regulatory Filings such as CTA-PR/CPO-PQR

Commodity Pool Operators (“CPOs”) should discuss with their auditors whether each of their commodity pools will be able to meet the deadline for fiscal year-end December 2019 pools. For most CPOs, the deadline for distributing and filing pool financials is 90 days after the pool’s fiscal year-end. The NFA maintains a process to request an extension. Please contact us if you need assistance with an extension.

Following conversations with the staff, we don’t expect to see detailed relief on CTA-PR or CPO-PQR filing deadlines. To the extent you need additional time to meet regulatory filings, the NFA requests that you contact them. We are happy to assist you with that process.

Relief for Branch Office Requirements

In light of COVID-19’s spread, the NFA issued a separate notice to members on March 13, 2020 regarding Compliance Rule 2-7 for branch offices. Under Form 7-R, a member is required to list the location of their branch office, along with the name of a qualified branch office manager. Each branch manager is required to maintain a Series 30.

  • Due to COVID-19, the NFA has received a number of inquiries asking whether a BCP that allows a member’s associated person (“AP”) to work from a remote location violates the NFA’s branch office requirements.

  • In response, the NFA affirmed that it will not pursue disciplinary action against a member who allows an AP to work from a remote location that lacks a branch manager and is not listed on Form 7-R.

  • The NFA conditioned the relief on (1) the member meeting recordkeeping requirements and (2) implementing adequate safeguards to supervise the AP’s activities. The NFA emphasized the temporary nature of this arrangement, and expects APs to be back working at the branch listed on Form 7-R upon the return to standard business operations.

Reminder on Upcoming Deadline for CTA-PR Filing Relief for Certain CTAs

To the extent a Commodity Trading Advisor (“CTA”) directs trading solely for pools for which the firm operates as a registered or exempt CPO, the CFTC has provided relief under Rule 4.27 to eliminate the requirement for the CTA to file CTA-PR. The NFA has a procedure by which the CTA can claim the exemption from CTA-PR. No later than March 31, 2020 the eligible firms should log in to their annual questionnaire and check “no” to the question “Does the firm currently direct any trading of commodity interest accounts?” and then click “Submit Filing.” Responding “No” will discontinue all future notifications to complete a CTA-PR.

The March 4, 2020 notice is available here.

The March 13, 2020 notice is available here.

© 2020 Vedder Price

TRENDING LEGAL ANALYSIS


About this Author

Joseph Mannon, Investment Lawyer, Vedder Price Law Firm
Shareholder

Joseph M. Mannon is a member of Vedder Price P.C.’s Investment Services group.

Mr. Mannon focuses his practice on legal and compliance matters for investment advisers, mutual funds, closed-end funds and unregistered vehicles such as hedge funds, hedge fund of funds and other investment entities.  With regard to unregistered vehicles, he frequently counsels clients on fund formation and structuring matters for funds organized both in the United States and abroad.  He also counsels clients on issues relating to commodity trading advisers and...

312-609-7883
Jeff VonDruska Investment Services Lawyer Vedder
Associate

Jeff VonDruska is an Associate in the Chicago office of Vedder Price and a member of the firm’s Investment Services practice group.

His practice includes the representation of investment advisers, family offices, private funds, registered mutual funds, closed-end funds, exchange-traded funds and other financial institutions on a broad range of legal, regulatory, governance, formation, and compliance matters.

Mr. VonDruska has significant experience in regulatory and compliance matters affecting investment advisers, including registration and marketing. He also counsels clients with respect to examinations and investigations conducted by the Securities and Exchange Commission and other regulators.

Prior to joining Vedder Price, Mr. VonDruska worked as counsel for a large fund of hedge funds adviser, focusing primarily on the legal due diligence aspect of the firm’s investment program and with responsibility over numerous regulatory compliance matters.

While in law school, Mr. VonDruska served as a judicial extern to the Honorable John W. Darrah of the U.S. District Court for the Northern District of Illinois and to the Honorable Charles R. Winkler of the Circuit Court of Cook County and served as a staff editor for The John Marshall Law Review.

+1 (312) 609 7563
Tyrique Wilson Investment Attorney Vedder Price Law Firm
Associate

Tyrique J. Wilson is an Associate in the Chicago office of Vedder Price and a member of the firm’s Investment Services group.

Mr. Wilson received his law degree from the Washington University School of Law in St. Louis and his undergraduate degree from The George Washington University. While in law school, Mr. Wilson was Treasurer of the Black Law Students Association, received an award for Excellence in Oral Advocacy and earned a Certificate in Business Law.

312-609-7689