The National Futures Association ("NFA") reminded member firms of financial reporting rule changes that became effective as of the quarter ending June 30, 2017.
In December 2016, the NFA released a notice advising members of the forthcoming changes to reporting requirements (see previous coverage). The amendment requires commodity pool operators ("CPOs") and commodity trading advisors ("CTAs") to report, on a quarterly basis, the following two ratios related to financial condition:
- Current Assets/Current Liabilities Ratio: divides current assets by current liabilities (measured at the end of a quarter) to provide a liquidity measure; and
- Total Revenue/Total Expenses Ratio: divides revenue earned by expenses over the preceding 12 months to provide a measure of the operating margin.
In accordance with the new ratio calculation requirements, the NFA made changes to Forms PQR and PR to include reporting fields. The NFA also reminded CPOs and CTAs of relevant recordkeeping requirements and of their obligation to demonstrate to the NFA how they calculated the ratios reported on Forms PQR or PR.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.