New Virtual Currency Disclosure Requirements

David Mulle, partner at law firm Seward & Kissel LLP, has authored an alert on the topic or virtual currency disclosures as put forth by the National Futures Association. He shared it with Traders Magazine.

Memorandum to our Investment Management Clients and Friends

The National Futures Association (the “NFA”) has adopted an interpretive notice (the “Interpretive Notice”) that enhances the disclosure requirements applicable to NFA members, including registered Commodity Pool Operators (“CPOs”) and Commodity Trading Advisors (“CTAs”), engaging in virtual currency activities. [See below link.]

Under the Interpretive Notice, registered CPO and CTA members, including those relying on Rule 4.7 (but excluding firms relying upon Rule 4.13(a)(3)’s exemption from registration), engaging in virtual currency activities are required to provide investors with standard disclosure as well as robust, customized disclosure in their disclosure documents, offering memoranda and promotional materials regarding their activities in spot market virtual currencies and virtual currency derivatives. Any promotional materials used by registered CPO or CTA members on or after October 31, 2018 must satisfy the requirements in the Interpretive Notice. In addition, registered CPO and CTA members must update their disclosure and offering documents and send notices to investors and prospective investors by November 21, 2018.

The Interpretive Notice is the latest requirement from the NFA regarding virtual currencies. Previously, the NFA issued a notice to members that requires a registered CPO or CTA member transacting in virtual currencies or virtual currency derivatives to notify the NFA of such activity through an amendment to the firm-level section of its annual questionnaire.