On October 3, 2012, the National Futures Association (the “NFA”) released a notice announcing that it had amended NFA Registration Rules 401 and 402 to exempt from the Series 3 proficiency exam requirement “associated persons” of commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) whose activities subject to Commodity Futures Trading Commission (“CFTC”) jurisdiction are limited to swaps. Such amendments were effective immediately.
Rules 401 and 402 require that an associated person of a registered CPO or CTA pass the Series 3 exam unless the person can rely on an exemption to, or obtain a waiver from, this requirement. Absent the relief provided by the NFA’s amendments to these rules, associated persons of CPOs and CTAs that are required to register with the CFTC solely as a result of their swap activities would have been required to pass the Series 3 exam. For further details on the registration of such CPOs and CTAs, please see the October 17, 2012 Investment Management Regulatory Update.
As a result of the NFA’s amendments, an associated person of a registered CPO or CTA whose activities are solely limited to swaps and who has answered “yes” to the questions regarding swap activities on his or her Form 8-R is automatically exempt from the Series 3 exam requirement. In addition, an associated person of a registered CPO that “but for the trading of swaps” would be exempt from CPO registration under CFTC Rule 4.13(a)(3) or excluded from the definition of CPO under CFTC Rule 4.5(c)(2)(iii)(A) or (B) may seek a waiver from the Series 3 exam requirement by sending a signed request to the NFA. The NFA’s notice provides additional details on the process for obtaining a waiver and completing the associated person’s Form 8-R. These new exemptions also apply to an associated person whose activities are limited to supervising other associated persons who are exempt from the Series 3 exam requirement.
In addition, as a result of the NFA’s amendment to Rule 402, any CPO that obtains a waiver on behalf of its associated persons and subsequently becomes ineligible for the waiver must notify the NFA in writing of such ineligibility.