CFTC Announces Streamlined Approach for Seeking Relief from Registration for Delegating Commodity Pool Operators

The CFTC’s Division of Swap Dealer and Intermediary Oversight (the “Division”) announced a streamlined approach for requesting relief from the commodity pool operator (“CPO”) registration requirement for a CPO that delegates investment management authority as a CPO of a commodity pool (the “Delegating CPO”) to another person who is registered as a CPO (the “Designated CPO”) where the Delegating CPO does not solicit participants for the pool or manage its property.  The streamlined approach does not provide blanket registration relief, but simply specifies procedures for requesting no-action relief when certain specified criteria are met.

Past Relief for Delegating CPOs.  The criteria for using the streamlined approach are designed to be consistent with the conditions for relief from the CPO registration requirement provided to Delegating CPOs in the past as discussed in the Division’s announcement.  For example, the letter notes that the CFTC has a relatively long history of issuing CPO registration no-action relief with respect to commodity pools organized as limited partnerships with two or more general partners, such that only one general partner was required to register as a CPO.  More recently, the CFTC has provided relief in the case of commodity pools organized as limited partnerships or limited liability companies in which an affiliated investment manager was allowed to serve as the registered CPO in place of the pool’s general partner or managing member.  The CFTC has also issued no-action relief to members of a board of directors or other governing body of a commodity pool domiciled and located outside the United States.

Streamlined Approach – Criteria.  The streamlined approach is available to those that meet certain specified criteria, which include the following, among others:  (1) the Delegating CPO must have delegated to the Designated CPO all of its investment management authority with respect to the commodity pool; (2) the Delegating CPO must not participate in the solicitation of participants for the commodity pool and must not manage any property of the commodity pool; (3) the Designated CPO must be a registered CPO; (4) the Delegating CPO must not be subject to specified grounds for disqualification from registration under the Commodity Exchange Act; (5) if the Delegating CPO and the Designated CPO are each a non-natural persons, they must be affiliates; and (6) if the Delegating CPO is a non-natural person, it and the Designated CPO must have executed a legally binding document whereby each undertakes to be jointly and severally liable for any violation of the Commodity Exchange Act and the CFTC’s regulations by the other in connection with the operation of the commodity pool.

Standardized Form of Request.  To request relief using the streamlined approach, the Delegating CPO must submit a request for relief in the form provided in the attachment to the Division’s letter announcing the streamlined approach.

Other Requests for Relief.  The letter notes that the Division will continue to evaluate requests for CPO registration no-action relief whose facts do not permit use of the streamlined approach.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

Topics:  CFTC, CPO, No-Action Letters, No-Action Relief, Registration

Published In: General Business Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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