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NFA Issues Notice on Calculating Financial Ratios on NFA Forms PQR and PR

National Futures Association (NFA) has issued a notice to commodity pool operator (CPO) and commodity trading advisor (CTA) members clarifying the method by which CPOs and CTAs should calculate the Current Asset/Current Liability (CA/CL) ratios and the Total Revenue/Total Expenses (TR/TE) ratios for purposes of NFA Forms PQR and PR.

As set forth in the notice, both ratios must be calculated using the accrual method rather than using the cash basis of accounting. In addition, the CA balance should be calculated using only assets owned by the CPO or CTA (rather than including client assets invested in pools or managed accounts) and only include current assets. Non-current assets should not be included in this calculation.

The notice also clarifies that the TR/TE ratio should be calculated using revenue earned and expenses incurred during the prior 12 months.

NFA Notice I-18-20 is available here.

©2019 Katten Muchin Rosenman LLP


About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.


James M. Brady, Katten Muchin Law Firm, Finance Attorney

James Brady concentrates his practice in financial services matters.

While in law school, James was an editor of the Michigan Journal of International Law. He also served as a judicial intern to the Honorable Stephen J. Markman of the Michigan Supreme Court.