The National Futures Association will require fund managers and member firms to ensure registration or continued exemption from commodity pool operator and commodity trading adviser registration as a result of the narrowing of the Section 4.5 and 4.13 exemptions.  A mutual fund manager must ensure that any sub-adviser it utilizes is either properly registered or exempt, although the NFA will not require mutual fund managers to determine whether investors must register. The fund manager must perform the same due diligence on any FCM through which it conducts business.  Also, the NFA is giving members until March 1, 2013 to ascertain whether the changes in Section 4.5 and 4.13 will trigger registration for current clients.  Member firms must perform due diligence and cease doing business with clients that do not comply.

OUR TAKE:  Fund managers need to start speaking with their sub-advisers about their commodity registration obligations.  Also, advisers that plan on ignoring the new registration requirements will be forced into registration because member firms won’t do business with them.