Monthly Archives: December 2012

SEC Compliance Manual Violations Mean Enforcement Action for Investment Adviser

Manager Subject to Enforcement Action for Compliance Manual and Books and Records Violations

The SEC recently announced a settlement with a former federally registered Investment Adviser that will, among other things, bar the firm and its sole owner from the financial services industry for two years. Citing violations of the Investment Advisers Act, perhaps the SEC’s most impactful charge involved lack of compliance with Rule 206(4)-7, which requires a firm to adopt and implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and its rules.

Background

The respondent, Barthelemy Group LLC (“the firm”) and its sole owner and adviser Evens Barthelemy, was a SEC registered adviser from 2009-2011. Mr. Barthelemy formed the firm in 2009 after having worked as a registered representative for two broker-dealers since 2000. In 2011, the firm withdrew its SEC registration after the SEC found that it did not meet the multi-state exemption nor did it have the required amount of assets under management ($25 million at the time). Since then, the firm has been registered in New York and New Jersey.

Summary of Violations

Compliance Failures

The SEC found that the firm did not institute written policies and procedures in accordance with Adviser Act Rule 206(4)-7. That rule requires advisers to adopt written policies and procedures that are designed to prevent violation (by the principal and all supervised persons) of the Act and SEC rules related to it. The settlement order noted that Mr. Barthelemy prepared the firm’s compliance manual in 2010 but that he had “largely adopted it verbatim from a 2009 version he obtained from his prior employment at a registered broker-dealer”. Given that the broker-dealer did not engage in the advisory business, the SEC found that the firm’s compliance manual violated Rule 206(4)-7, noting that the manual referred to the Securities Act of 1933 and the Securities Exchange Act of 1934 but made no reference to the Advisers Act. In the same vein, the manual referred to duties of suitability and fairness but never mentioned the fiduciary duty that advisers owe their clients. The firm’s manual also referenced commission-based compensation and broker-dealer filings, none of which are relevant to comply with Rule 206(4)-7. Finally, the SEC found that the firm did not undertake an annual review of the adequacy of the compliance manual.

Books and Records Failures

The firm was found to be non-compliant with Rule 204-2(a) which requires advisers to make and keep true, accurate and current certain books and records relating to the advisory business. Specifically, the SEC stated that the firm did not have copies of the written acknowledgements of the firm’s code of ethics. Additionally, in connect with Rule 204-3 which requires delivery of a firm’s Form ADV to clients or prospective clients, the firm did not have records of such delivery also required by Rule 204-2(a).

Overstating Assets Under Management on Form ADV

The SEC found that the firm was not eligible for SEC registration under both the multi-state exemption or by meeting the minimum threshold test ($25 million at the time). The now rescinded multi-state exemption permitted those advisers subject to regulation by thirty or more states, to register with the SEC. However, the SEC found that the firm was subject to at most three states’ regulatory regimes. In addition, the SEC found that the firm managed nowhere near the $26.5 million it claimed, but rather the total was around $2.6 million. This misrepresentation violated Section 207 of the Act, which makes it unlawful for any person to willfully make untrue statements of material fact in a registration statement. In addition, this conduct violated Section 203A of the Act, which prohibits SEC registration as an adviser unless the firm meets a relevant exemption.

Penalties

Given the adviser’s inability to pay, no civil penalty was asserted. However, the following penalties were instituted:

  • The firm must furnish a copy of the SEC order to each existing client;
  • The firm must post a copy of the order on its website for a period of two years;
  • Certify evidence in writing of the steps taken to comply with all violations of the Act and its rules;
  • Mr. Barthelemy is barred from employment in the financial services industry for a period of two years; and
  • Mr. Barthelemy is censured.

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Cole-Frieman & Mallon LLP provides legal services to the investment management industry. The firm provides regulatory and compliance support and other legal services to hedge fund managers. The firm can be reached here and Bart Mallon can be reached directly at 415-868-5345.

Cole-Frieman & Mallon LLP 2012 End of Year Checklist

Below is our end of year checklist we send out to our mailing list.  If you would like to be added to the mailing list, please contact us here.

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December 14, 2012

Clients and Friends:

December is the busiest month of the year for most hedge fund managers. In addition to all of the administrative details involved in closing out the year, the regulatory landscape has shifted dramatically over the past year. As a result, year-end processes and 2013 planning are particularly important, especially for General Counsels, Chief Compliance Officers and key operations and financial personnel. We have updated our own year-end checklist to help managers stay on top of these priorities.

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Adviser Registration:

Form ADV Annual Amendment. Registered investment advisers, or managers filing as exempt reporting advisers (an “ERA”), with the SEC or a state securities authority must file an annual amendment to Form ADV within 90 days of the end of their fiscal year. Registered investment advisers must provide a copy of the updated Form ADV Part 2A brochure and Part 2B brochure supplement (or a summary of changes with an offer to provide the complete brochure) to each “client”. Note that for private fund managers, a “client” for purposes of this rule is the fund.

Switching to/from SEC Regulation.

SEC Registration. Managers who no longer qualify for SEC registration as of the time of filing the annual amendment must withdraw from SEC registration within 180 days after the end of their fiscal year by filing Form ADV-W. Mangers should consult their state securities authority to determine if they are required to register in the state. Managers who are required to register with the SEC as of their annual amendment must register with the SEC within 90 days of filing the annual amendment.

Exempt Reporting Advisers. Managers who no longer meet the definition of an ERA will need to submit a final report as an ERA and apply for registration with the SEC or the state securities authority, if necessary, generally within 90 days after the filing of the annual amendment.

California Private Fund Adviser Exemption. The California private fund adviser exemption (“Private Fund Adviser Exemption”) is available to advisers who provide advice solely to “qualifying private funds,” which include venture capital funds, Section 3(c)(1) funds and Section 3(c)(7) funds. Advisers who qualify for the Private Fund Adviser Exemption and manage less than $100 million can file as an ERA in California and avoid registration and compliance requirements.

CFTC Matters:

Expanded CFTC Regulation. As of October 12, 2012 an investment manager that trades certain swaps will be subject to regulation by the CFTC, even if the manager does not trade futures or commodity interests. Managers should review the recently expanded list of CFTC regulated products to determine whether they will be subject to CFTC regulation. Managers subject to CFTC regulation will need to evaluate whether they are eligible for an exemption or need to register with the CFTC by December 31, 2012.

Annual Re-Certification of CFTC Exemptions. CPOs and CTAs currently relying on exemptions from registration with the CFTC will be required to re-certify their eligibility by December 31, 2012. CPOs currently relying on CFTC Regulation 4.13(a)(3) will need to evaluate whether the commodity pool is still eligible for the exemption when taking into account the new CFTC regulated products. Managers who had previously relied on the 4.13(a)(4) exemption from CPO registration will need to determine whether they are eligible to rely on another exemption or will need to register with the CFTC by December 31, 2012.

CPO and CTA Annual Updates. Registered CPOs and CTAs must prepare and file Annual Questionnaires and Annual Registration Updates with the NFA, as well as submit payment for annual maintenance fees and NFA membership dues. Registered CPOs must also prepare and file an annual report for each commodity pool. Unless eligible to claim relief under Regulation 4.7, registered CPOs and CTAs must update their disclosure documents periodically, as they may not use any document dated more than 9 months prior to the date of its intended use. Disclosure documents that are materially inaccurate or incomplete must be promptly corrected and the correction must be promptly distributed to pool participants.

General Regulatory Matters:

New Issue Status. On an annual basis, a manager needs to confirm or reconfirm the eligibility of investors that participate in initial public offerings or new issues. Most managers reconfirm this via negative consent, i.e., investors are informed of their status as on file with the manager and asked to inform the manager of any changes. No response operates as consent to the current status.

ERISA Status. Given the significant problems that can occur from not properly tracking ERISA investors, we recommend that managers also confirm or reconfirm on an annual basis the ERISA status of its investors. This is particularly important for managers that track the underlying percentage or ERISA funds for each investor. This reconfirmation can also be obtained through a negative consent.

Annual Privacy Policy Notice. On an annual basis, a registered investment adviser must also provide its investors with a copy of its privacy policy, even if there are no changes to the policy.

Annual Compliance Review. On an annual basis, the Chief Compliance Officer (“CCO”) of a registered investment adviser must conduct an annual review of the manager’s compliance policies and procedures. This annual compliance review should be in writing and presented to senior management. We recommend that you discuss the annual review with your outside counsel, who can provide guidance about the review as well as a template for the assessment and documentation. Managers should be careful that sensitive conversations regarding the annual review are protected by attorney-client privilege. CCOs may also want to consider additions to the compliance program. Managers who are not registered may still wish to review their procedures and/or implement a compliance program as a best practice.

Trade Errors. Managers should make sure that all trade errors are addressed by the end of the year pursuant to the manager’s polices regarding trade errors. Documentation of trade errors should be finalized, and if the manager is required to reimburse the funds, it should do so by year-end.

Soft Dollars. Managers that participate in soft dollar programs should make sure that they have addressed any commission balances from the previous year.

Custody Rule Annual Audit. SEC registered advisers must comply with certain custody procedures, including (i) maintaining client funds and securities with a qualified custodian; (ii) having a reasonable basis to believe that the qualified custodian sends an account statement to each advisory client at least quarterly; and (iii) undergoing an annual surprise examination conducted by an independent public accountant.

Advisers to pooled investment vehicles may avoid both the quarterly statements and surprise examination requirements by having audited financial statements prepared in accordance with GAAP by an independent public accountant registered with the Public Company Accounting Oversight Board. Statements must be sent to the fund or, in certain cases, investors in the fund, within 120 days after the fund’s fiscal year end. Managers should review their custody procedures to ensure compliance with the rules. Requirements for state-registrants may differ, and we encourage you to contact us if you have any questions or concerns about your custody arrangements.

Schedule 13G/D and Section 16 Filings. Managers who exercise investment discretion over accounts (including funds and separately managed accounts) that are beneficial owners of 5% or more of a registered voting equity security must report these positions on Schedule 13G. Schedule 13G filings are updated annually within 45 days of the end of the year. For managers who are also filing Schedule 13D and/or Section 16 filings, this is an opportune time to review your filings to confirm compliance and anticipate needs for Q1.

Form 13F. A manager must also file a Form 13F if it exercises investment discretion with respect to $100 million or more in certain securities within 45 days after the end of the year in which the manager reaches the $100 million filing threshold. The SEC lists the securities subject to 13F reporting on its website.

Form 13H. Managers who meet the SEC’s large trader thresholds (in general, managers whose transactions in exchange-listed securities equal or exceed two million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month) are required to file an initial Form 13H with the SEC within 10 days of crossing the threshold. Large traders will need to file amended annually within 45 days of the end of the year. In addition, changes to the information on 13H will require interim amendments following the calendar quarter in which the change occurred.

Blue Sky Filings. On an annual basis, a manager should review its blue sky filings for each state to make sure it has met any renewal requirements. States are increasingly imposing late fees or rejecting late filings altogether. Accordingly, it is critical to stay on top of filing deadlines for both new investors and any renewals.

SEC Form D. Form D filings for most funds need to be amended on an annual basis, on or before the anniversary of the initial SEC Form D filing. Copies of Form D can be obtained by potential investors via the SEC’s website.

IARD Annual Fees. Preliminary annual renewal fees for state registered and SEC registered investment advisers were due by December 13, 2012. Managers filing after the deadline will likely be subject to additional late filing fees and these must be paid through the IARD by February 1, 2013.

Pay-to-Play Rules. In 2010, the SEC adopted Rule 206(4)-5, which disqualified investment advisers, their key personnel and placement agents acting on their behalf, from seeking to be engaged by a governmental client if they have made political contributions. State and local governments are following suit, including California, which requires such persons to register with the state as lobbyists and mandates lobbyist registration in California’s cities and counties. We recommend reviewing your reporting requirements to make sure you are in compliance with the rules.

Form PF. Managers to private funds that are either registered with the SEC or required to be registered with the SEC began filing Form PF earlier this year. Managers to private funds with less than $5 billion in regulatory AUM will need to make Form PF filings with the SEC beginning on December 15, 2012, on either a quarterly or annual basis, depending on the types of private funds managed and regulatory AUM.

Foreign Tax Compliance Act (“FATCA”). FATCA will require certain financial institutions to identify and disclose direct and indirect U.S. investors and withhold U.S. income tax on nonresident aliens and foreign corporations, or be subject to a 30% FATCA tax. Foreign financial institutions, which include hedge funds, funds of funds, commodity pools and other offshore investment vehicles, will be required to enter into an agreement with the IRS (an “FFI Agreement”) by January 1, 2014 to avoid being subject to the FATCA tax. Domestic funds will also be required to determine the FATCA status of their investors and will need to institute specific withholding and reporting procedures for recalcitrant investors. Managers should discuss FATCA compliance methods with their administrators and other third party service providers to ensure proper document collection and due diligence procedures. Managers may want to update their documents to include FATCA disclosure and representations.

Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act, enacted earlier this year, directed the SEC to remove the prohibitions on general solicitation or general advertising for certain private securities offerings. The proposed rule amendments, which are still awaiting final approval by the SEC, would allow issuers to use general solicitation and general advertising to offer securities, provided that the issuer takes reasonable steps to verify that the purchasers of the securities are accredited investors. Managers should remember that while general solicitations may be allowable in the future, these rules are not yet final. In addition, all registered investment advisers will still be subject to applicable advertising regulations under the Investment Advisers Act. CFTC registered managers are still subject to certain CFTC regulations that prohibit marketing to the public, and managers that intend to rely on the 4.13(a)(3) “de minimus” exemption (discussed above) are also prohibited from marketing to the public.

Other Fund Matters:

Wash Sales. Managers should carefully manage wash sales for year end. Failure to do so could result in embarrassing book/tax differences for investors. Certain dealers can provide managers with swap strategies to manage wash sales, including Basket Total Return Swaps and Split Strike Forward Conversion. These strategies should be considered carefully to make sure they are consistent with the investment objectives of the fund.

Redemption Management. Managers with significant redemptions at the end of the year should carefully manage the unwinding positions so as to minimize transaction costs in the current year (that could impact performance), and prevent transaction costs from impacting remaining investors in the next year. When closing funds or managed accounts, managers shall pay careful attention to the liquidation procedures in the managed account agreement and the fund constituent documents.

NAV Triggers and Waivers. Managers should promptly seek waivers of any termination events that may be triggered by redemptions, performance or a combination of redemptions and performance in a fund’s ISDA or other counterparty agreement at the end of the year (NAV declines are typically included in these provisions).

Fund Expenses. Managers should wrap up all fund expenses for 2012 if they have not already done so. In particular, managers should contact their outside legal counsel to obtain accurate and up to date information about legal expenses for inclusion in the NAV for year-end performance.

Management Company Issues:

Management Company Expenses. Managers who distribute profits on an annual basis should attempt to address management company expenses in the year they are incurred. If ownership or profit percentages are adjusted at the end of the year, a failure to manage expenses could significantly impact the economics of the partnership or the management company.

Employee Reviews. An effective annual review process is important to reduce employment related litigation and protect the management company in the event of such litigation. Moreover, it is an opportunity to provide context for bonuses, compensation adjustments, employee goals and other employee-facing matters at the firm. It is not too late to put an annual review process in place.

Compensation Planning. In the hedge fund industry, and the financial services industry in general, the end of the year is the appropriate time to make adjustments to the compensation program. Since much of a manager’s revenue is tied to annual income from incentive fees, any changes to the management company structure, affiliated partnerships, or any shadow equity program should be effective on the first of the year. Make sure that partnership agreements and operating agreements are appropriately updated to reflect such changes.

Insurance. If a manager carries D&O Insurance or other liability insurance, the policy should be reviewed on an annual basis to make sure that the manager has provided notice to the carrier of all claims and all potential claims. Also, newly launched funds should be added to the policy as appropriate.

Please feel free to reach out to us if you have any questions regarding your end-of-the-year compliance. We wish you all the best as 2012 comes to a close.

Sincerely,

Karl Cole-Frieman & Bart Mallon

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Cole-Frieman & Mallon LLP is a premier boutique investment management law firm, providing top-tier, responsive and cost-effective legal solutions for financial services matters. Headquartered in San Francisco, Cole-Frieman & Mallon LLP has an international practice that services both start-up investment managers as well as multi-billion dollar firms. The firm provides a full suite of legal services to the investment management community, including: hedge fund, private equity fund, and venture capital fund formation, adviser registration, counterparty documentation, SEC, CFTC, NFA and FINRA matters, seed deals, hedge fund due diligence, employment and compensation matters, and routine business matters. The firm also publishes the prominent Hedge Fund Law Blog (www.hedgefundlawblog.com) which focuses on legal issues that impact the hedge fund community. For more information please visit us at: www.colefrieman.com.

Investment Adviser and IA Representative Registration Renewal 2013

If your firm is registered as an investment adviser (IA) then you may have received notice from FINRA to renew your firm’s registration for 2013. If you have not received the notice or have not paid the renewal fees, the following provides an overview of the process.

Background

IA firms and IA representatives (RAs) should be aware that registrations expire annually on December 31. In order for an IA firm to maintain their active registrations and/or notice filing statuses and for RAs to maintain active registration statuses, the IA firms must pay applicable renewal fees annually. The IARD Renewal Program facilitates the annual renewal process. A Preliminary Renewal Statement which is made available on the IARD system, will include an amount that must be paid to FINRA by December 13, 2012. Remember to allow sufficient

time for payments made by check and sent through the postal service. Online payments made via E-Pay should be made by December 10, 2012 in order for the funds to be posted by December 13, 2012.

Submitting Payment

The preliminary renewal statement have been made available. IA firms can access this statement via IARD by following these steps:

1. Log onto IARD here.

2. Enter your firm’s ID and password.

3. Review and accept the terms and conditions.

4. Under the “Accounting” tab at the top of the page, select “Renewal Account.”

5. One the left column, select “Renewal Statement.”

The bottom of the page provides an itemized list of all applicable fees.

Payment by Check

If you choose to submit payment by check, print the statement and mail it, along with the check to the following address:

U.S. Mail:

FINRA

FINRA/CRD

P.O. Box 7777-9995

Philadelphia, PA 19175-0001

(Note: this P.O. Box address will not accept courier or overnight deliveries.)

Express Delivery:

FINRA/CRD

Attn: 9995

500 Ross Street 154-0455

Pittsburgh, PA 15262

(240) 386-4848

The check should be made payable to: FINRA. Be sure to write your CRD Number and the word “Renewal” on the face of the check. Be sure to also include the first page of the Renewal Statement.

Payment via CRD/IARD E-Pay

Payment can also be submitted online via CRD/IARD E-Pay. To do so, follow these instructions:

Go to the E-Pay website and:

1. Enter your login and password. If you have not yet created an account, do so by clicking “sign up.”

2. On the left column under “Payments,” click “Pay my accounts.”

3. Select the account and click “Continue.”

4. Enter the total Payment Amount and check “Renewal” under Account Type. Then enter the payment method and click “continue.”

5. Review the information and click “Make Payment.”

6. Log out and the money should post within about 2 days.

Automatic Daily Account-to-Renewal Account Transfer

If your firms has sufficient funds in the Daily Account to cover the total renewal amount, FINRA will automatically process the renewal payment by the payment deadline.

Other Payment Methods

Wire payments sent by 2 p.m. (ET), should post the next business day. Wire payments sent after 2 p.m., ET, may take up to 2 business days to post. Instructions for initiating a wire can be found here.

Confirming Payment

After payment is submitted, you will be able to retrieve your firm’s online Final Renewal Statement on IARD on or after January 2, 2013. These statements will reflect the final registration status of the IA firm and RAs. To do so, follow the instructions above to log onto IARD. Under the “Renewal Statement” link in the “Accounting” section, you can retrieve the Final Renewal Statement, which will state “Paid in Full” or “Amount Due.” If an amount is due, the balance must be paid by February 1, 2013.

It is important to make sure payment is made by the deadline, otherwise the registration may be terminated. The firm will then have to contact each regulator to request re-registration instructions.

More information about the Renewal Program can be found on the IARD website. FINRA has also posted a bulletin on the 2013 IARD Renewal Program, available here.

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Cole-Frieman & Mallon LLP provides legal services to hedge fund managers and investment advisers. Bart Mallon can be reached directly at 415-868-5345.

NFA Guidance on CPO / CTA Yearly Exemption Affirmations

Yesterday the NFA issued a notice to persons that are currently relying on exemptions or exclusions from registration as a Commodity Pool Operator or Commodity Trading Advisor. The notice explains that certain exemptions and exclusions must be “affirmed” on an annual basis via the NFA’s online Exemption System. The first annual affirmation is due within the first 60 days after December 31, 2012. Exemptions that are not affirmed within this period will be automatically withdrawn. The NFA notice also contains a number of FAQs.

We have reprinted the notice below.

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Notice to Members I-12-30

December 3, 2012

Guidance on the Annual Affirmation Requirement for those Entities that are currently operating under an exemption or exclusion from CPO or CTA registration

In February 2012, the CFTC issued final rules that now require any person that claims an exemption or exclusion from CPO registration under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or an exemption from CTA registration under 4.14(a)(8) to annually affirm the applicable notice of exemption or exclusion within 60 days of the calendar year end. The first notice affirming these exemptions is due for the calendar year ending December 31, 2012 and annually thereafter. Failure to affirm any of the above exemptions or exclusions will be deemed as a request to withdraw the exemption or exclusion and therefore, result in the automatic withdrawal of the exemption or exclusion once the 60 day period has elapsed.

How to complete the affirmation process

Starting on December 3, 2012, any person or entity that claims an exemption or exclusion under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) or 4.14(a)(8) will be able to complete the affirmation process by accessing NFA’s Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML.

Once logged into the system, you will be directed to the Exemption Index, which lists all Firm Level (at the top) and Pool Level (at the bottom) exemptions on file with NFA. Exemptions requiring affirmation will be identified with an icon in the ‘Affirm’ column. After clicking

on the icon, a pop-up box will appear requesting affirmation that the exemption continues to be effective. By clicking ‘OK’, the current date will replace the ‘Affirm’ icon and effectively complete the affirmation requirement for the given exemption for the year. The same process must be completed for each and every exemption on file that requires affirmation.

Failure to affirm an active exemption or exclusion from CPO or CTA registration will result in the exemption/exclusion being withdrawn after the 60 day period has ended. For registered CPOs or CTAs, withdrawal of the exemption/exclusion will result in the firm being subject to Part 4 Requirements for that pool regardless of whether the firm otherwise remains eligible for the exemption/exclusion. For non-registrants, the withdrawal of the exemption may subject you to enforcement action by the CFTC.

Frequently Asked Questions for Exemptions

How often will I need to affirm my exemptions?

You will need to affirm each applicable exemption on an annual basis, within 60 days after December 31. NFA will provide an annual email reminder of the affirmation process. The email reminder will be sent to the email contact on file in NFA’s Exemption System. In order to ensure that your firm receives NFA’s annual reminder, you must ensure a current email address has been provided in NFA’s Exemption System. If the contact information changes during the year, firms are urged to promptly update this information.

What if NFA records reflect an exemption for a pool that is no longer active?

A registered CPO can update NFA’s records with the applicable information. The CPO must first withdraw the exemption by accessing NFA’s Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. At the time you withdraw the exemption, you will be directed to the Annual Questionnaire to delete or cease the pool.

A non-registered entity must notify NFA with specific information about the pool by sending written notification to [email protected] The written notification should include the full name of the entity and the pool.

If I can no longer qualify for an exemption or exclusion from CPO or CTA registration, what should I do?

If you do not affirm the applicable exemption or exclusion within the 60 day period, it will be automatically withdrawn. As a result, in order to continue to operate the pool, you may be required to be registered as a CPO and/or CTA and be an NFA Member. You can apply for registration and NFA membership in NFA’s Online Registration System (ORS), which is available on NFA’s website. For assistance in the process, NFA has a number of video tutorials available at http://www.nfa.futures.org/NFA-registration/videos/index.HTML.

I currently operate pools exempt under 4.13(a)(3), but I will no longer meet the requirements of this exemption as of January 1, 2013. I understand that NFA currently offers certain entities the ability to pre-register as a CPO, which allows a firm to defer registration until that date. Is this available to entities that operate pools exempt under 4.13(a)(3)?

No, the pre-registration option is not available to entities operating 4.13(a)(3) pools. It is only available to entities operating pools that are exempt under 4.13(a)(4), 4.5, CPO 12-03 No-Action, or 4.13 No Action.

How will firms that I do business with know that I have completed the Affirmation Process?

Once an entity affirms the applicable exemptions, NFA’s BASIC System will reflect the affirmation date for each exemption held. Further, BASIC will also reflect a withdrawal date if the exemption is not affirmed in the required 60-day period.

If I currently conduct business with an exempt CPO or CTA, how do I ensure that these entities have properly affirmed their exemptions in order to satisfy my Bylaw 1101 requirements?

NFA’s BASIC System will reflect whether an exemption held by a particular CPO or CTA has been successfully affirmed by including an affirmation date. A withdrawal date will be reflected for any exemption that was not affirmed for a given CPO or CTA. NFA has also provided Members with access to a spreadsheet that includes a list of all entities that have exemptions on file with NFA that must be affirmed on an annual basis. This spreadsheet can be found in the Member’s Annual Questionnaire at http://www.nfa.futures.org/NFA-electronic-filings/annual-questionnaire.HTML. Once logged in, you will see a link to a spreadsheet which is updated nightly. The spreadsheet will include all entities with an exemption(s) that requires affirmation, as well as the affirmation date, if applicable. If the spreadsheet does not reflect an affirmation date, the exemption has not been affirmed.

Any questions regarding these processes should be directed to:

Susan Koprowski, Manager, Compliance ([email protected] or 312-781-1288) or

Michael Mason, Manager, Compliance ([email protected] or 312-781-1447).

You are receiving this message because you are either a Member of National Futures Association (NFA) or you subscribed to the email subscription list on NFA’s Website. Additionally, you may be receiving this message because NFA records indicate you previously filed notice of exemption from CPO or CTA registration. To cancel or change your subscription at any time, visit the Email Subscriptions page on our Website at http://www.nfa.futures.org/news/subscribe.asp.

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Cole-Frieman & Mallon LLP provides legal services to CFTC registered firms and NFA member firms. Bart Mallon can be reached directly at 415-868-5345.

Hedge Fund Events December 2012

The following are various hedge fund events happening this month. Please email us if you would like us to add your event to this list.

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December 2-4

December 2-4

December 2-5

December 3

December 3

December 3-4

December 3-4

December 4

December 4

December 4

December 4

December 4-5

December 4-5

December 4-5

December 5

December 5

December 5

December 5

December 6

December 6

December 6

December 6

December 10

December 10

December 11-12

December 11-12

December 12

December 12

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Cole-Frieman & Mallon LLP provides legal services for hedge fund managers and other groups within the investment management industry. Bart Mallon can be reached directly at 415-868-5345.