NFA Provides Bylaw 1101 Guidance to Commodity Pool Operators of Investment Companies


Under amended Commodity Futures Trading Commission Regulation 4.5, registered investment advisers (RIAs) to registered investment companies engaging in more than minimal commodity trading activities will be required to register as commodity pool operators (CPOs) and become members of the National Futures Association (NFA). NFA Bylaw 1101 requires that CPOs determine if any participants in their commodity pools are required to be registered with the NFA.

Until further notice, the NFA has determined that CPOs to investment companies will not be required to perform due diligence on pool participants (i.e., fund shareholders) pursuant to NFA Bylaw 1101. These CPOs still need to fulfill their Bylaw 1101 obligations to ensure that any futures commissions merchant through which they transact commodity transactions and any sub-adviser to their investment company is properly registered in the appropriate capacity and is a member of the NFA, or is exempted from commodity trading adviser registration. The NFA is to provide additional guidance regarding due diligence obligations under NFA Bylaw 1101 that will eventually supersede the current interpretation of Bylaw 1101.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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