The Commission is currently asking for comments on a proposed rule change. They wish to add a section to require that each person registered as an IB, CPO or CTA become and remain a member of a registered futures association, such as the NFA.
Under CFTC Reg. 4.14(a)(9) a person is not required to register as a CTA if it does not: (i) direct any client accounts; or (ii) provide commodity trading advice based on, or tailored to, the commodity interest or cash market positions or other circumstances or characteristics of particular clients. This exemption from registration primarily applies to CTAs who only provide advice to the general public, usually in a newsletter and not to specific clients. The Commission requires registration of these entities currently, but does not require membership in the NFA.
In response to a member inquiry, the NIBA contacted the NFA. They explained that the CFTC proposal is primarily intended to fill gaps in regulation for swaps IBs, CTAs and CPOs. In the proposed rulemaking, however, the CFTC also included the type of CTAs who contacted us -- firms who distribute primarily distribute newsletter to agricultural clients.
The NFA confirms that if the proposal becomes effective, these entities will become members and be subject to an exam, but no disclosure document will be required because they do not manage accounts. Additionally, if the member is already an IB, there would likely not be an increase in membership dues because firms with multiple categories of membership pay dues for only one category -- the highest amount under all their membership categories.
The CFTC comment period closes on this proposal January 7, 2014. If you want to submit a comment directly to the CFTC, you can do that by filing it through the CFTC’s website http://comments.cftc.gov. The comment should be identified as RIN number 3038-AE09: Membership in a Registered Futures Association.
