Francesc Riverola,Client withdrawals from account
Previously it was common for some CTAs to have some sort of lock-up period with respect to a trading program. Now, the NFA will not allow a CTA to have a lock-up period because the client is always able to go to the FCM and cancel the account. While from a technical perspective the client always has access to its own account and the CTA can’t control access to the account, many CTAs preferred the implicit protection afforded through the contractual agreement that the account would stay open during the lock-up. By not allowing the lock-up language, CTAs will potentially be subject to greater and more frequent withdrawals from investors.
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One Response to “NFA Changes Post CFTC Audit”
CTA’s still have the ability to register as a CPO (Commodity Pool Operator) where they take physical control of the investors money, the same way a hedge fund or mutual fund does. They can require lock-up in that instance if the customer has agreed to it. Being a CPO comes with additional compliance and requirements, but there are benefits too. This helps further that distinction.