Commodity pool operators (CPOs) that are registered, or registering, with the U.S. Commodity Futures Trading Commission (CFTC) and that are, or are becoming, members of the National Futures Association
(NFA), need to comply with numerous CFTC and NFA requirements. One of the key compliance obligations is the requirement for a CPO to (1) list its principals on its registration application with the NFA (Form 7-R) and (2) register its associated persons (APs) with the NFA (Form 8-R) and submit a Form 8-R for each natural person principal so that the NFA can perform a background check. This article details who or what is a principal and who is an AP; outlines the process for registration of APs and listing of natural person principals; and describes some basic supervisory obligations applicable to APs and principals as employees of the CPO and provides some general guidance on how to comply with those supervisory obligations. This article is the third of a three-part series of articles that focuses in detail on various compliance obligations of CPOs under CFTC and NFA regulations and guidance. The first article covered 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)
,” Hedge Fund Law Report, Vol. 5, No. 34 (Sep. 6, 2012). The second article covered the various prohibitions and guidelines for marketing activities and promotional materials for both CPOs and commodity trading advisors under various CFTC regulations and NFA compliance rules. See “CPO Compliance Series – Marketing and Promotional Materials (Part Two of Three)
,” Hedge Fund Law Report, Vol. 5, No. 38 (Oct. 4, 2012). For additional coverage of each of these topics and other relevant topics, see “Do You Need to Be a Registered Commodity Pool Operator Now and What Does it Mean If You Do? (Part One of Two)
,” Hedge Fund Law Report, Vol. 5, No. 8 (Feb. 23, 2012). The authors of this article and the other articles in this series are Stephen A. McShea, General Counsel and Chief Compliance Officer of Larch Lane Advisors LLC; Cary J. Meer, a partner at K&L Gates LLP; and Lawrence B. Patent, of counsel at K&L Gates LLP.