Reminder: CPO and CTA Annual Affirmation Requirement
Client memorandum | January 24, 2023
Authors: William J. Breslin, David S. Mitchell, Shweta Kapoor, and Josh Xiong
The Commodity Futures Trading Commission (“CFTC”) requires any person that claims:
(1) an exemption from commodity pool operator (“CPO”) registration under CFTC Rule 4.13 (except for any person claiming the exemption for family offices under Rule 4.13(a)(6));
(2) an exclusion from the CPO definition under CFTC Rule 4.5; or
(3) an exemption from commodity trading advisor (“CTA”) registration under CFTC Rule 4.14(a)(8),
to annually affirm the applicable notice of exemption or exclusion within 60 days of the calendar year end. Affirmations for the current cycle are due no later than March 1, 2023.
Note that an exempt CPO affirming an existing notice filing under CFTC Rules 4.13(a)(1), (2), (3) or (5) is required to represent that neither such firm, nor any of its principals, has in its background a statutory disqualification that would require disclosure under Section 8a(2) of the Commodity Exchange Act, as amended (“CEA”), if such person sought registration (unless such disqualification arises from a matter disclosed in connection with a previous application for registration, where such registration was granted). An exempt CPO making this representation is generally advised to (i) identify the principals of their firm and (ii) conduct background checks into such individuals to determine whether they have in their backgrounds any statutory disqualification enumerated in Section 8a(2) of the CEA.
A CPO or CTA subject to the annual affirmation requirement who fails to file such annual affirmation by March 1, 2023 will have its exemption or exclusion automatically withdrawn. Thus, CPOs and CTAs are encouraged to file their annual affirmation(s) as soon as possible, and in any event before this deadline, to avoid the potential adverse impacts of automatic withdrawal of the applicable exemption or exclusion.
The annual affirmation process can be completed by accessing the National Futures Association’s (“NFA’s”) Exemption System on its website. For additional details, CPOs and CTAs may wish to refer to NFA’s recent Notice to Members regarding the annual affirmation requirement, available here.
 See CFTC Rule 4.13(b)(1)(iii).
 Under CFTC Rule 3.1(a), the term “principal” generally includes individuals and entities who have management authority over a CPO, as well as any legal person who is a 10% or greater owner of a CPO or who is entitled to 10% or more of its profits. A “principal” usually includes general partners, managing members, chief executive officers, chief operating officers, and certain other senior officers in addition to any 10% or greater owner.
 See 7 U.S.C. 12a(2). Covered statutory disqualifications under Section 8a(2) of the CEA generally include: (i) an unexpired suspension or revocation of a prior CFTC registration; (ii) refusal of CFTC registration within the preceding five years of an application for registration; (iii) being enjoined from acting as a CFTC or Securities and Exchange Commission registrant or from engaging in an activity that involves embezzlement; theft; extortion; fraud; fraudulent conversion; misappropriation of funds, securities, or property; forgery; counterfeiting; false pretenses; bribery; gambling; or any transaction in or advice concerning futures contracts or securities; (iv) a felony conviction for certain commodities or securities-related offenses within the preceding ten years; or (v) willfully making any materially false or misleading statement or omission in connection with any application for CFTC registration or any update thereto.
 See also: https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=5516
This communication is for general information only. It is not intended, nor should it be relied upon, as legal advice. In some jurisdictions, this may be considered attorney advertising. Please refer to the firm’s data policy page for further information.