Reminder for CPOs and CTAs to Report Financial Information on NFA Forms PQR and PR

Effective as of the quarter ending June 30, 2017, the National Futures Association (the "NFA") Forms PQR and PR have been updated to contain data fields requiring commodity pool operators (the "CPO") and commodity trading advisors (the "CTA") to report the following two ratios: • Current Assets/Current Liabilities (the "CA/CL") Ratio - This ratio divides a firm's current assets by its current liabilities, providing a measure of a firm's liquidity. This ratio is based on a firm's current asset and current liability balances at the reporting quarter end. • Total Revenue/Total Expenses (the "TR/TE") Ratio - This ratio divides a firm's total revenue by its total expenses, measuring a firm's operating margin. Although a firm will report this ratio each quarter, the ratio must reflect the total revenue earned and total expenses incurred during the prior 12 months.

All ratios must be computed using the accrual method of accounting and in accordance with generally accepted accounting principles or another internationally recognized accounting standard, consistently applied. Listen to the recording of NFA's recent Member Workshop for guidance on how to convert from cash basis to accrual basis of accounting, if needed.

Reporting Required Ratios on the Form PQR or PR

To report these ratios on the updated Form PQR or PR, CPOs and CTAs should follow the steps below.

1) Confirm that the above ratios will be reported at the firm level or parent/holding company level. 2) Specify the reporting period. Firms with a fiscal year end not aligned with calendar quarter ends may report as of the firm's most recent fiscal quarter end. 3) Enter the CA/CL ratio, which should be calculated by dividing current assets by current liabilities at the reporting quarter end. 4) Enter the TR/TE ratio, which should reflect total revenue earned and expenses incurred during the prior 12 months.

In advance of the reporting deadlines (August 14, 2017 for CTA-PR and August 29, 2017 for CPO-PQR), Members should consider the NFA's guidance on the new ratios and determine how to calculate the new ratios, especially if they do not already calculate these ratios.

Recordkeeping

CPO and CTA Members must be able to demonstrate to NFA how they calculated the ratios reported on Form PQR or PR and maintain financial records supporting the calculation of these ratios in accordance with NFA Compliance Rule 2-10. Each CPO and CTA Member must make these financial records available to NFA during an examination or upon request.

If you have questions about this Alert, please contact Daniel G. Viola at 212.573.8038, dviola@sglawyers.com.

Cheryl Spratt