Lawyers Sound Warning On Commodity ETFs And Commodity-Registered Advisors

Monday, February 20, 2012 09:41
Lawyers Sound Warning On Commodity ETFs And Commodity-Registered Advisors

Tags: commodities


As the Commodity Futures Trading Commission "harmonizes" its regulations with the SEC, lawyers warn that CFTC advisors and those who simply work with CFTC products should be on their guard.

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For retail advisors, the biggest concern that Sutherland Asbill & Brennan is flagging revolves around making sure investor collateral is tracked effectively.


Funds that do not segregate each investor's money out run the risk of creating MF Global-style headaches, the lawyers say.


Given the number of due diligence claims against other "alternative" products in the last few years, no advisor wants to expose his or her clients to the prospect of a commodity fund losing the assets -- much less deal with the backlash.


SEC-registered advisors who also have to register as a CPO or CTA will also need to file a new Form PF starting in the current quarter.


For those advisors who primarily operate under CFTC rules -- maybe running their own commodity pools or ETF-like structures -- the lawyers have more detailed suggestions.


While they are probably not applicable to most A4A readers, the underlying message is clear for all. Due diligence. Transparent custody. Know where the assets are at all times. 



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