Preparing For Form CPO-PQR & CTA-PR

Apr 18 2013 | 6:47am ET

By Gurvinder Singh
CEO of Indus Valley Partners

Increased global regulation and the demand for more transparency have many private fund managers facing their most daunting reporting requirements to date. Both the Securities and Exchange Commission and Commodity Futures Trading Commission have imposed regulations requiring vast amounts of time-consuming data reporting. This is pushing managers to look for more painless solutions than manually filing forms.

SEC and CFTC regulations have become the catalyst for fund managers to re-evaluate their data management and reporting capabilities from the bottom up. Many managers must now invest more in IT to help mitigate the risks associated with manually filing regulatory reports.

With the initial round of the SEC’s Form PF filing now complete, managers have a better idea of the scale and scope of the datasets they need to collect and report firm-wide. The internal processes that the managers defined for Form PF can now be leveraged for similar upcoming filing efforts, such as Form CPO-PQR & CTA-PR.

Increasingly asset managers are worried about integrity of the regulatory filings being done by their third party service providers such as fund administrators, and are starting to take greater ownership for the accuracy of the data that goes into their filings.

The regulatory risk associated with incorrect filings due to mistakes by third party providers and/or laborious efforts to double check the filings data is clarifying the need in many fund manager minds for an automated solution that allows them to quickly validate and generate the appropriate regulatory filings with an appropriate audit trail.

Aimed at providing regulators with better oversight of individual funds, as well as increased transparency across the industry, Form CPO-PQR & CTA-PR will require detailed reporting beginning on March 2013 for any funds providing direct commodities exposure (CPOs managing more than 1.5 billion were required to start filing as of March 1st for the year-ended December 31, 2012) . While similar in process to the SEC’s Form PF, the new CFTC regulation is aimed at covering all Commodity Pool Operators (CPO’s) and Commodity Trading Advisors (CTA’s).

The filing deadlines and the amount of data that must be reported on Form CPO-PQR, for both SEC registered and non-registered CPOs, hinges upon the CPO’s assets under management.

Breakdown of section requirements:

Click Image to EnlargeClick Image to Enlarge


Having assisted many alternative asset managers in automating the filing and reporting of Form PF, ADV, 13F,D, G we have summarized our experiences into a set of best practices for managers facing new regulatory reporting requirements such as CPO PQR in the US and the upcoming AIFM directive in Europe.

Create A Roadmap

Below is a recommended approach for creating a successful road map for your own CPO-PQR & CTA-PR filings:

1) Start early. We cannot stress how important it is to begin preparations for any filing at an early stage. The added time provides a buffer for review of all section requirements.

2) Co-ordinate with solution providers and leverage automated solutions. Managers should spend more time collaborating internally and ensuring accurate data filings, rather than building databases and new reports. Automation can also significantly reduce the chance for manual errors.

3) Organize cross-functional teams. Filing is a large undertaking for funds of any size. Managers must organize teams that include; accounting, operations, risk, compliance and IT. Portfolio Managers themselves must also allocate time to review filings for accuracy. No one team or individual will have enough data to complete the entire form.

4) Conduct a mock filing. Run the filing to ensure accuracy and continuity and to address any last second roadblocks that need immediate attention.

5) Maintain an audit trail. Throughout the entire filing process it is essential to maintain a comprehensive audit trail. This involves keeping a record of all inputs into the filing and the assumptions behind them.

Regulations will not be going away, and managers must ensure their funds are operationally fit for the continuous barrage of reporting requirements that lay ahead of them. Taking the appropriate steps prior to filing will enable funds to keep their teams on task and be prepared for any unexpected hurdles. While no two funds are alike, these precautionary steps can help serve as guideposts to success and are common to all.

Gurvinder Singh is CEO and Managing Director of Indus Valley Partners, a niche, technology consultancy focused on the capital markets industry.

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