Beginning 31 October 2018, the National Futures Association (NFA) will require investment managers, future commission merchants (FCMs) and introducing brokers (IBs) that engage in activities related to virtual currencies or virtual currency derivatives to provide new disclosures to customers. The Commodity Futures Trading Commission (CFTC) approved NFA Interpretive Notice 9073 – Disclosure Requirements for NFA Members Engaging in Virtual Currency Activities (Interpretive Notice), which was submitted by letter dated 20 June 2018.

CPOs and CTAs: Robust New Disclosures

A registered Commodity Pool Operator (CPO) or Commodity Trading Advisor (CTA) that manages virtual currency products (i.e., by operating a fund/pool or managed account trading program) must include significant new disclosure in their offering documents and promotional materials. The new requirement also includes exempt pools, including those with Section 4.13 exemptions. While many managers trading virtual currencies already include significant risk disclosure, such risk disclosure may not address all issues raised by the NFA (e.g., perceived higher costs of custody for virtual currencies). CPOs and CTAs also must provide standardized language addressing the limits of NFA oversight with respect to spot market virtual currencies.

CPOs and CTAs must be in compliance with promotional material requirements by 31 October 2018, and all other requirements will be effective 21 November 2018.

FCMs and IBs: Virtual Currency Advisories and New Standardized Disclosure

The NFA also standardized disclosure for other NFA members. In particular, the NFA will require FCMs and IBs to provide virtual currency derivative customers with NFA and CFTC advisories on risks of virtual currency trading. Then, by 30 November 2018, FCMs and IBs must provide the two advisories to any customer that has traded a virtual currency derivative prior to October 31, 2018.

Additionally, the Interpretive Notice sets forth a standardized disclosure that an FCM or IB that engages in any type of spot market virtual currency activity must provide to customers on or after October 31, 2018. The standardized disclosure must also be prominently displayed in any of the FCM or IB promotional materials.

Further information is available in NFA’s recent Notice to Members.

1 17 C.F.R. § 4.13.






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