1. National Futures Association
Webinar for CPOs and CTAs Whose Exemptions Expire 12/31/2012

2. Today’s Presenters
Larry Dyekman, Director, Communications and Education
Patricia Cushing, Director, Compliance
Tracey Hunt, Associate Director, Compliance
Mary McHenry, Associate Director, Compliance

3. Webinar Agenda:
CPO/CTA Exemptions – What’s going away and what is still available
The Registration Process
Regulatory Responsibilities

4. Changes Affecting Exempt CPOs
4.13(a)(4) exemption
Definition of “commodity interest” now includes swaps
4.13(a)(3) de minimis exemption
4.5 exemption for otherwise regulated entities

5. 4.13(a)(3) Exemption Trading Tests
Must meet one of two tests:
The aggregate initial margin/premium does not exceed 5% of the liquidation value of the pool’s portfolio; or
The aggregate net notional value of commodity interest positions does not exceed 100% of the liquidation of the pool’s portfolio.

6. 4.5 Exemption and Registered Investment Companies
Marketing Restriction
The investment company cannot be marketed as a commodity pool or as a vehicle for trading in the commodity futures, options or swaps markets.

7. 4.5 Exemption and Registered Investment Companies
Trading Restrictions
Commodity futures, commodity options and swaps trading must be for bona fide hedging purposes and any initial margins and premiums required to establish transactions not considered as a bona fide hedge may not exceed 5% of the liquidation value of the pool’s portfolio; or
The aggregate net notional value of commodity futures, options or swaps not used solely for bona fide hedging purposes must not exceed 100% of the liquidation value of the pool’s portfolio.

8. What Are My Options?
Continue to operate under the exemption or exclusion that I currently hold;
Determine if I’m able to avail myself of an alternative exemption; or
Register as a CPO

9. Changes Affecting Exempt CTAs
The 4.14(a)(8) exemption is available to advisors whose advice is solely limited to pools that are exempt under 4.13(a)(3), (a)(4) and 4.5.
4.13(a)(4) is going away at the end of this year.
Determine if you will still be able to claim the exemption or if you will need to register as a CTA.

10. When Should I Begin the Registration Process?
The sooner the better!
Pre-registration option
Pre-filing of available exemptions

11. What Happens on 12/31/12?
All 4.13(a)(4) and related No Actions filings will be automatically withdrawn from our system.
If you have satisfied all registration requirements on or before 12/31/12, your registration as a CPO or CTA will become effective.
Any pre-filed exemptions will also become effective on 1/1/13 if all other registration requirements have been completed.

29. Who needs to be listed as a principal?
Job titles
Ownership
Job duties

30. Job Titles Proprietor of sole proprietorship
General Partner of a partnership
Manager or Managing Member for an LLC
Board of Directors
President
CEO, COO, CFO
Any person in charge of a business unit subject to CFTC regulation

31. Ownership
Any entity that owns 10% or more of any class of the Member’s stock
Any entity who has contributed 10% or more of the Member’s capital
Any individual who directly or indirectly owns 10% or more of any class of the Member’s stock
Any individual who has contributed 10% or more of the Member’s capital

32. Indirectly owns 50% of Member
Individual
100% Owner
Holding Company
Indirectly owns 50% of Member
50% Owner
NFA Member Firm
Both the Holding Company and the Individual would need to be listed principals of the NFA Member Firm.

33. Job Duties
An individual with controlling influence over the Member’s activities
An individual who has control to make decisions that materially affect the firm’s futures, options, forex or swaps business without any sort of supervision.

34. Criteria for Being Listed as a Principal
The individual’s ability to control a Member’s business activities;
The individual’s formal title or position with the Member; or
The individual’s financial or ownership interest in the Member.

35. Who has to register as an AP?
An individual who solicits orders, customers or customer funds on behalf of any NFA Member firm or someone who supervises other APs who are actually doing the soliciting.
Anyone who is in the supervisory chain-of-command and not only to persons who directly supervise.

36. Proficiency Requirements
National Commodity Futures Examination (Series 3)
Alternative for persons with certain registrations in the UK or Canada: Limited Futures Examination – Regulations (Series 32)
Waivers: See NFA’s website for details

37. Branch Office Registration
A branch office is any location, other than the firm’s main business address, where a Member’s APs are conducting business.
Each branch office must have a registered branch office manager.

38. Regulatory Requirements
Disclosure Documents
Financial Records
Performance Reports

39. Periodic Reporting to Pool Participants
Account statements must be distributed within 30 days following the end of the reporting period.
Statements must include statements of income/loss and changes in Net Asset Value.
Signed oath or affirmation must accompany account statement.

40. Pool Annual Report
Must contain information for two preceding fiscal years;
Must be distributed to participants within 90 days after the end of the fiscal year or permanent cessation of trading;
Must be prepared in accordance with U.S. GAAP and certified by an independent CPA; and
Must be filed with NFA.

41. CPO Quarterly Reporting to NFA/CFTC
CPO must enter the following information:
Identity of specific relationships, such as pool’s administrator, carrying broker(s), trading manager(s), etc.
Statement of Changes in NAV for reporting period
Monthly performance for the period
Schedule of investments

42. CTA Quarterly Reporting to NFA/CFTC
New CFTC regulation requires CTAs to file an annual report within 45 days of December 31.
NFA has proposed that CTAs file similar reports each quarter with additional information on relationships, assets under management and rates of return, on a program basis.
Reports will be filed electronically via NFA’s website.

43. Disclosure Documents
Must be submitted to, and accepted by, NFA prior to first use.
Must be updated at least every 9 months, if the CPO or CTA continues to solicit potential clients/participants.
All clients/participants must sign and date an acknowledgement of receipt of the document, which the firm must maintain.

44. Information Included in a Disclosure Document
Business Background
CTA Trading program and Pool Investment Program
Principal Risk Factors
Fees
Conflicts of Interest
Litigation
Performance

45. Self-Examination Questionnaire
Includes a general questionnaire and five supplemental questionnaires for each applicable registration category.
Designed to aid members in recognizing potential problem areas and to alert them to procedures that need to be revised or strengthened.
Supervisory person must sign and date a written attestation stating that they have reviewed the Member’s operations in light of the matters covered by the questionnaire.
NFA updates questionnaires to reflect new and amended rules as necessary.

46. NFA Audits Registration of APs, Principals, Other Firms
Promotional Material
Disclosure and Performance Reporting
Financial Reporting
Account Opening
Trading and Bunched Orders
Supervision

47. NFA Publications Self-Examination Questionnaire
Disclosure Document Guide
Promotional Material Guide
Regulatory Requirements Guide

48. Additional NFA Resources
Registration Tutorial Videos
Podcasts
Webinars
Workshops

49. NFA Information Center
Contact NFA
NFA Information Center
(312)
(800)