Designated institutions in business primarily to make loans to farmers, ranchers and other agricultural entities are excluded from the definition of commodity trading advisor (CTA), according to the Commodity Futures Trading Commission (CFTC).
Any commodity trading advice provided by institutions in the “Farm Credit System” (FCS) is incidental to their lending activities, the agency said. The Farm Credit Council (FCC), which represents members of the system, petitioned the Commodity Futures Trading Commission (CFTC) in October to exclude FCS institutions from the CTA definition, the CFTC said in an order.
FCS is a federally chartered network of borrower-owned institutions that make loans to agricultural interests. The lenders, which are regulated like banks by the Farm Credit Administration, include CoBank, AgriBank, AgFirst Farm Credit Bank and Farm Credit Bank of Texas. They make loans to affiliated associations, which then extend loans to borrowers.
FCS members exist primarily to make loans, the FCC told the commission. FCS institutions use derivatives to manage their own risks and offer them to borrowers so the borrowers can manage risk associated with their loans, according to the CFTC. Information provided by FCS institutions about derivatives “generally is generic and not intended as commodity trading advice,” the CFTC said. Borrowers also acknowledge that FCS lenders are not advisors, the agency said.
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