Originally published in The Hedge Fund Law Report, Volume 5, Number 38, on October 4, 2012.
Commodity pool operators (CPOs) that must soon register with the U.S. Commodity Futures Trading Commission (CFTC) and become members of the National Futures Association (NFA) because of the rescission of the CFTC Regulation 4.13(a)(4) registration exemption will shortly need to undertake numerous CFTC and NFA compliance obligations. One of the key compliance obligations arises from CFTC Regulation 4.41 and NFA Compliance Rule 2-29, each of which sets forth various prohibitions and guidelines for marketing activities and promotional materials for both CPOs and commodity trading advisors (CTAs). In certain instances, these guidelines require very specific disclosures and statements to be included in the promotional materials. While these prohibitions and guidelines are similar to those contained in Section 206 of the Investment Advisers Act of 1940 (Advisers Act) and related Securities and Exchange Commission (SEC) noaction guidance concerning advertising materials, the CFTC and NFA guidelines have a few specific requirements, and applications of those requirements, that are different from those applicable to SEC-registered investment advisers. A newly registered CPO and/or CTA may find that its current promotional materials and review practices may not satisfy some of the CFTC’s and NFA’s guidelines or may not comply with the manner in which the NFA may apply those guidelines. This article discusses in detail the CFTC and NFA prohibitions and guidelines for marketing activities and promotional materials for CPOs and CTAs contained in CFTC Regulation 4.41 and NFA Compliance Rule 2-29 and its related interpretive notices and provides practical guidance on how to comply with these prohibitions and guidelines.
This article is the second of a three-part series of articles that focus in detail on various compliance obligations of CPOs under CFTC and NFA regulations and guidance. The first article addressed NFA Bylaw 1101, which addresses conducting business with non-NFA members. See “CPO Compliance Series: Conducting Business with Non-NFA Members (NFA Bylaw 1101) (Part One of Three),” The Hedge Fund Law Report, Vol. 5, No. 34 (Sep. 6, 2012). The third article will address reporting of principals and registration of associated persons. For additional coverage of each of these topics and the topics discussed in this article, see “Do You Need to Be a Registered Commodity Pool Operator Now and What Does It Mean If You Do? (Part One of Two),” The Hedge Fund Law Report, Vol. 5, No. 8 (Feb. 23, 2012).
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