CPO Settles NFA Charges for Unregistered AP Activity

A commodity pool operator ("CPO") settled National Futures Association ("NFA") charges for (i) allowing unregistered individuals to solicit fund participants, (ii) failing to supervise employees effectively and (iii) failing to report certain individuals as firm principals.

According to the NFA Business Conduct Committee ("BCC") Order, the CPO permitted two unregistered individuals to solicit prospective participants for its pool and oversee its operations. The BCC found that both individuals conducted solicitation activities and had direct involvement in managing participant investments, despite neither holding the required associated person registration with the NFA. The BCC said this action violated NFA Bylaw 301(b) ("Requirements and Restrictions") and Registration Rule 208 ("Reporting of Principals").

Further, the BCC found that the CPO failed to meet its supervisory obligations under NFA Compliance Rule 2-9(a) ("Supervision"). The BCC said that the CPO's reliance on unregistered individuals led to lapses in reporting and oversight, including a delay in listing the CPO's Fund with the NFA and a failure to report indirect owners as principals until 2024, despite their involvement since 2022. Additionally, the BCC found that the CPO's quarterly reports contained inaccuracies regarding futures trading activity within the fund.

To settle the charges, without admitting or denying the allegations in the Complaint, the CPO agreed to pay a $200,000 fine.