In September 2009, the NFA adopted Rule 2-45, which prohibits CPOs from making any direct or indirect loans or advances of pool assets to the CPO or any affiliated person or entity.  The NFA adopted the rule in response to several complaints where a CPO’s principal used loan proceeds to purchase luxury items or the proceeds went to related entities that did not have sufficient assets to pay back the loans.

As I have written about before, last year, the CFTC adopted changes to the exemptions for CPOs and a number of previously exempt CPOs are now required to register.  Some of these previously exempt CPOs engage in transactions that have characteristics similar to a loan.  The NFA analyzed these transactions and revised Rule 2-45 to exclude certain transactions.  The excluded transactions include engaging in certain short sales, loaning the value of idle securities, making indirect or direct debt or equity investments in a subsidiary through guarantees secured by the pool’s assets or entering into repurchase or reverse repurchase agreements.

This rule change is another example of the NFA revising its rules in response to the comments made by newly registered CPOs that were exempt from registration last year.  We can expect that the NFA will modify additional rule changes before the end of the year.