After a period of public comment relating to certain Commodity Futures Trading Commission (CFTC) proposals released in January 2011, the CFTC issued final rules adopting significant revisions to regulations involving regulatory compliance obligations for Commodity Pool Operators (“CPOs”) and Commodity Trading Advisors ("CTAs"). The final rules include, among others, rescinding an exemption that many private fund advisers rely upon to avoid registration and adopting new data collection forms.
On February 9, 2012, in response to public comments, the CFTC decided to adopt many of the amendments that it previously proposed, with some modifications. The final rules (i) rescind an exemption from CPO registration set forth in CFTC Rule 4.13(a)(4), which many advisers to private funds have relied upon to avoid CPO registration; (ii) significantly impact the ability of registered investment companies to claim an exclusion from the definition of CPO provided under CFTC Rule 4.5; (iii) adopt new data collection forms for CPOs and CTAs; and (iv) require persons relying upon exemptions established by CFTC Rules 4.5, 4.13, and 4.14 to affirm on an annual basis the accuracy of their original notice of exemption. While the CFTC had proposed to rescind the exemption from CPO registration under Rule 4.13(a)(3) (i.e., the “de minimis” futures activity exemption), the final rules have kept that exemption in place.
Rescission of Registration Exemption for Pools Offered to Qualified Eligible Persons
The final rules rescind the exemption from registration as a CPO set forth in CFTC Rule 4.13(a)(4). This Rule currently provides an exemption from registration for pools whose participants are either qualified eligible persons (“QEPs”) or institutional accredited investors. Notably, the final rules also amend the exemption from registration as a CTA for persons registered with the Securities and Exchange Commission (the SEC), or any state (or exempt from registration or excluded from the definition of investment adviser) who advise commodity pools whose CPOs rely upon either of CFTC Rules 4.13(a)(3) or 4.14(a)(4). This amendment removes the CFTC Rule 4.14(a)(4) reference from such CTA registration exemption.
CPOs previously claiming exemption under CFTC Rule 4.13(a)(4) are now required to register as a CPO (unless able to avail themselves of another exemption from registration) by December 31, 2012. All other CPOs will be required to abide by the rescission of CFTC Rule 4.13(a)(4) upon the effective date of the final rules...
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