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If you are a commodity pool operator preparing to submit your annual report there are a few things you should keep in mind to make the process as painless as possible.
In line with CFTC Regulations 4.22, commodity pool operators (CPOs) are required to prepare and distribute an Annual Report to each participant in each pool it operates and must electronically submit a copy of the Report to the National Futures Association within 90 calendar days after the end of the pool’s fiscal year.
The Annual Report must be presented and computed in accordance with United States generally accepted accounting principles (GAAP), consistently applied, and must be audited by an independent public accountant.
Below are a few exceptions and items to note as you prepare to submit your filings.
Stub period relief
If you are a newly registered CPO, you may be eligible for stub period relief. CFTC regulations permit a CPO to provide an unaudited Annual Report for a pool’s first fiscal year, if the following criteria are met:
- Time from which the CPO first receives funds, securities or other property from a participant in the pool, to the pool’s first fiscal-year end is four months or less (stub period)
- Throughout the stub period, the pool had no more than 15 participants and their aggregate gross capital contributions to the pool did not exceed $3 million, not including participants who are listed in CFTC Regulation 4.22(g)(2)(ii)(A)(1)-(5)
- A waiver of the right to timely receive an audited Annual Report for the pool’s first fiscal year is obtained from each participant other than the pool operator, the pool’s commodity trading advisor, any person controlling, controlled by, or under common control with the pool operator or trading advisor, or any principal of the before mentioned;
- A notice containing the information required in CFTC Regulation 4.22(g)(2)(ii)(C)(2) is filed with NFA prior to the date the CPO is required to distribute and submit the Annual Report for the pool’s first fiscal year
- The next Annual Report for the pool is audited and covers the stub period plus the pool’s first 12-month fiscal year.
Additional Alternative GAAP relief
CFTC regulations permit, in certain circumstances, non-U.S. pools to use Additional Alternative GAAP in the presentation and computation of Annual Reports, periodic Account Statements, and/or Pool Quarterly Reports.
- To claim the Additional Alternative GAAP relief available under CFTC Regulation 4.22, a CPO must file the 4.22(d)(2) pool exemption with NFA using NFA’s Electronic Exemption System within 90 calendar days after the end of the pool’s first fiscal year.
Exemptions where participants are insiders
CFTC regulations also permit a CPO to provide an unaudited pool Annual Report if, during any fiscal year, the pool only had insiders as participants. For purposes of this relief, insiders are one or more of the pool operator(s), the pool’s commodity trading advisor, any person controlling, controlled by, or under common control with the pool operator or trading advisor, and any principal of the foregoing. To claim this relief, the CPO must obtain a written waiver from each insider pool participant of their right to receive an audited Annual Report. To notify NFA that the CPO is taking advantage of this relief, when filing the pool’s Annual Report with NFA, the CPO must check box 5018.
Notifying change in auditor
Finally, if the independent auditor has changed since the most recent filing, the firm will need to file notice in NFA’s Exemption system pursuant to CFTC regulation 1.16(g) informing the commission of such change.
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