Recent changes to the commodity pool regulations under the Commodity Exchange Act (the “CEA”) may subject certain securitization transactions and their managers to regulation by the Commodity Futures Trading Commission (the “CFTC”). In a no-action letter issued on December 7, 2012, the CFTC provided limited exclusions from commodity pool regulation for certain categories of securitization vehicles and no-action relief to certain securitization vehicles created before October 12, 2012. It also extends to March 31, 2013 the date by which operators of securitization vehicles that are commodity pools and that do not qualify for an exemption must register with the CFTC as commodity pool operators (“CPOs”).
This Alert describes (1) the background of the changes to the CFTC’s commodity pool regulations as they relate to securitization vehicles, (2) the scope of the CFTC’s CPO registration exemption under CFTC Regulation 4.13(a)(3), and (3) the partial regulatory relief available under CFTC Regulation 4.7(b) for managers of collateralized debt obligation (“CDO”) or other securitization vehicles all of whose investors are “qualified eligible persons” (“QEPs”) as defined in CFTC Regulation 4.7.
The CEA provides that funds operated for the purpose of trading in commodity interests are considered to be “commodity pools.” “Commodity interests” have historically included futures contracts, commodity options, retail forex transactions and leverage contracts. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the term “commodity interests” was extended to include “swaps.” As a consequence of this extension, pooled investment funds that enter into swaps (separate and apart from other more traditional commodity interest transactions) may now be considered to be “commodity pools.”
Please see full alert below for more information.
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