CTA and CPO Foreign Language Disclosure Documents

Translating a Disclosure Document to Another Language is Fine

NFA Member Firms are required to have their disclosure documents reviewed by the NFA generally before such firms can distribute the documents to potential investors.  One issue which sometimes arises is when the firm (generally either a CTA or CPO) has potential clients/investors who are non-U.S. citizens and do not speak English.  In these cases the question arises as to whether the CTA or CPO can translate their disclosure documents into another language.

I just recently spoke with a compliance representative at the NFA and the answer I received is: Yes, the CTA or CPO can have the document translated into another language.  The big issue obviously is that the NFA Member Firm must be able to represent to the NFA that the translation is exact and the firm must generally make the translated copy available to the NFA during examination.  Also, there are two central ways which firms will typically approch this situation:

Disclose to NFA – some firms will proactively disclose to the NFA that they have translated a disclosure document into another language.  This can be done in a number of ways including: (i) providing a note to the NFA during the document submission or (ii) calling the NFA directly and talking with a representative or compliance manager.

Do not disclose to the NFA – some firms will not disclose to the NFA that a document has been translated.  According to my phone conversation, this is fine, but the Member Firm will need to have a copy of the translated document and verify to the NFA that the translated version is exactly the same as the English language based version.

NFA Compliance Issues

Compliance.  CTAs and CPOs must remember that, as Member Firms, there are ongoing recordkeeping responsibilities.  Accordingly, the firm should have policies and procedures in place that address the issue of having translated disclosure documents.  Additionally, firms should remember that disclosure documents are usually good for nine (9) months and must be updated thereafter (or if there are any material changes to the document which must be disclosed) – this means that the translated copy should also be appropriately updated.

Forex.  These same rules will also apply to Forex CTAs and Forex CPOs.  The CFTC just recently announced that forex managers will need to register with the CFTC and become NFA member firms.  When forex managers register then, this will apply to them and they will need to follow these rules as well.

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Other articles applicable to NFA member firms include:

Bart Mallon, Esq. of Cole-Frieman & Mallon LLP runs the Hedge Fund Law Blog.  He can be reached directly at 415-868-5345.

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