NFA Questions CFTC Proposal to Increase Disclosures for Commodity Pools

NFA questioned the rationale and benefits of proposed changes in a CFTC proposal to increase the disclosure requirements for commodity pools and managed account programs operated by registered commodity pool operators ("CPOs") and commodity trading advisors ("CTAs").

In a comment letter, NFA challenged a variety of proposed changes to CFTC Rule 4.7 ("Exemption from certain part 4 requirements for commodity pool operators with respect to offerings to qualified eligible persons and for commodity trading advisors with respect to advising qualified eligible persons.")

As to the CFTC proposal that would double the portfolio requirement for a person to meet the standard of a "qualified eligible person," NFA suggested that the CFTC should not raise the eligibility standard by so much, but that instead the CFTC should work with the SEC on more closely aligning the CFTC "QEP" definition with the SEC's definition of an accredited investor.

NFA asserted that the additional disclosure requirements were largely unnecessary and would materially raise costs that would be passed on to investors. NFA also stated that these increased regulatory costs would likely discourage small firms from conducting CPO/CTA activities, and it noted that the business of acting as a CPO/CTA had become increasingly concentrated even while the volume of commodity pools grew.

NFA supported the CFTC's proposal as to the timing of the distribution of monthly account statements by pools that are funds of funds; i.e., 45 days after month's end.

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