Commodity Pool Operators and Commodity Trading Advisors will now be required to report two new ratios on their PQR and PR as of the quarter ending June 30, 2017.

These new reporting requirements evolved from the NFA’s review of possible changes to the regulatory structure applicable to CPO and CTA Members. The goal of this was to identify regulatory solutions to address a number of emergency disciplinary actions the NFA had taken against CPO and CTA Members that had hurt customers due to firms with insufficient assets to operate.

NFA Forms PQR and PR will contain data fields requiring CPO and CTA Members to report the following two ratios:

• Current Assets/Current Liabilities (CA/CL) Ratio—This ratio divides a firm’s current assets by its current liabilities, providing a measure of a firm’s liquidity. This ratio is based on the balances at the quarter’s end.
• Total Revenue/Total Expenses (TR/TE) Ratio—This ratio divides a firm’s total revenue by its total expenses, measuring a firm’s operating margin. Although this ratio is to be reported each quarter, the ratio must reflect the total revenue earned and total expenses incurred during the prior 12 months.

These ratios must use the accrual method of accounting and be in accordance with GAAP and be applied consistently.

CTAs and CPOs that are a part of a holding company or subsidiary structure may elect to report the ratios at the parent level.  There will be a data field available on forms PQR and PR to reflect this.

NFA will be providing a webinar early in the year to assist with guidance regarding how to complete these new data fields.

Please call Mike Coglianese at 630-351-8942 or email mike@cogcpa.com if you need further explanation with regard to the new required ratios.

The full interpretive notice can be found by clicking here.