CTA and CPO Common Deficiencies

Below are a few regulatory obligations related to common deficiencies as noted during NFA audits of Commodity Pools and Commodity Trading Advisors.

1.  Cybersecurity.  Commodity Pools and Commodity Trading Advisors must adopt a written Information Systems Security Program (ISSP) to address the risk of unauthorized access or attack to technology systems.  Members must document the planned response appropriate to an unauthorized attack. If an attack should occur, CPOs and CTAs must notify NFA of the incident related to commodity interest activities via NFA’s Cyber Notice Filing System.  An area common to deficiencies include the failure to provider training to new employees as well as ongoing annually.  Members that fail to establish and implement an ISSP can be subject to NFA disciplinary action.
2. Self-Exam Questionnaire.  NFA Members are obligated to review their operations on an annual basis using the NFA’s Self-Examination Questionnaire.  This is designed to assist members with recognizing potential problems and alert them to procedures that must be revised or strengthened.  Failure to do this on an ongoing basis can lead to disciplinary action and enforcement.
3. Pool Financial Reporting – Notification Requirements. 
   1. Changes in Fiscal Year End:  If a Commodity Pool Operator elects a fiscal year end other than calendar year end for their pool, the pool manager must supply written notice of this election to all pool participants AND file notice with NFA via EasyFile within 90 calendar days after the pool’s formation.  If notice is not distributed, the pool will be deemed to have elected the calendar year end as the pool’s fiscal year end as a default.  If the CPO is electing to change the fiscal year end, they must provide written notice to all pool participants as well as NFA via EasyFile at least 90 days before the change.
   2. Changes in Accountant:  If a CPO changes their independent CPA that is engaged to perform the pool’s annual certified audit, the CPO must file notice with NFA via EasyFile no more than 15 days after the CPA’s resignation or dismissal.
   3. Extension Requests:  If a CPO requests an extension to file an annual pool financial statement, the extension must be filed with NFA via EasyFile prior to the due date of the filing.  Failure to file a written extension after the due date will result in fines and possibly disciplinary action.
   4. Cessation of Trading:  When a commodity pool ceases trading, the CPO must immediately update the Annual Questionnaire.  The CPO must also distribute to participants the final Annual Report and file that Annual Report with NFA.  The Annual Report is due 90 days after the pool has ceased trading.  There are a few exceptions to this requirement.
   5. Calculation of Financial Ratios:  CPOs and CTAs must compute financial ratios using accrual method of accounting and in accordance with U.S. generally accepted accounting principles or another internationally recognized accounting standard.  For guidelines on calculating these ratios, please click here.

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