Letter to the National Futures Association (NFA) commenting on the NFA’s authority to impose a capital requirement on its commodity pool operator and commodity trading advisor members

SUMMARY

In a letter to the National Futures Association (NFA), the Committee on Futures and Derivativesprovided comments on proposed changes with regard to the CPO/CTA capital requirement and customer protection measures (“the Notice”), on the question of the NFA’s authority to impose a capital requirement on its commodity pool operator (CPO) and commodity trading advisor (CTA) members. The Committee commented that while it supports the goal of protecting the assets and interests of customers of CPOs and CTAs, neither the Commodity Exchange Act nor the Commodity Futures Trading Commission’s designation of the NFA as a registered futures association specifically confers authority on the NFA to create capital requirements for CPOs and CTAs. Therefore, the issues raised in the Notice should be initiated with Congress and the CFTC in the first instance, and the NFA should consider the issues of legal authority and legal process before undertaking any action pursuant to the Notice.