[co-author: Marylyn Harrell]

The Commodity Futures Trading Commission published on April 14, 2020, a proposal to amend certain compliance requirements for commodity pool operators under CFTC Rule 4.27 and CFTC Form CPO-PQR, as codified at Appendix A to the CFTC’s Part 4 rules.¹ This proposal is the first substantive amendment to CFTC Form CPO-PQR since it was adopted in 2012. The CFTC requests comments on the proposed rule and makes specific requests for comments in the notice of proposed rulemaking. Comments are due to the CFTC by June 15, 2020.

Specifically, the proposed amendments would:

• Eliminate the pool-specific reporting requirements in existing Schedules B and C of CFTC Form CPO-PQR, except for the pool schedule of investments (question 6 of Schedule B);
• Amend the information requested in existing Schedule A of CFTC Form CPO-PQR to request Legal Entity Identifiers (LEIs) for CPOs and their operated pools (if LEIs have been obtained); and
• Eliminate from Schedule A questions regarding pool auditors and marketers.

If the above proposals are adopted, going forward all CPOs would be required to file the revised CFTC Form CPO-PQR on a quarterly basis, regardless of a CPO’s size. This will be a departure from the current requirement where Large CPOs² file CFTC Form CPO-PQR quarterly and all other CPOs (Small and Mid-Sized CPOs) file CFTC Form CPO-PQR on an annual basis. However, because the National Futures Association (NFA) has required Small and Mid-Sized CPOs to file NFA Form PQR³ for the first, second and third quarters of each calendar year, all CPOs have already effectively had a quarterly filing obligation. As such, the filing schedule will not change.

Further, the CFTC is proposing to amend CFTC Rule 4.27(d) to no longer permit the filing of the Securities and Exchange Commission’s Form PF to serve as substituted compliance for filing Schedules B and C of CFTC Form CPO-PQR. Because CPOs dually-registered with the SEC as investment advisers nevertheless have been subject to the NFA Form PQR quarterly filing requirement, substituted compliance has been of fairly limited practical use to eligible CPOs. The deletion of most of Schedule B and all of Schedule C should have the effect of bringing amended CFTC Form CPO-PQR filing requirements into alignment with what CPOs relying on substituted compliance have been filing all along.

In addition to eliminating a significant number of questions from CFTC Form CPO-PQR, the amendments would add certain questions to enable the data the CFTC collects to be used conjunctively with other data regarding the commodity interest markets. Specifically, the inclusion of reporting LEIs for CPOs and their pools would enable the CFTC to leverage other data sets it receives more frequently than CFTC Form CPO-PQR filings from other sources regarding the swaps market (e.g., swap data repositories). Note however, that reporting LEIs on amended CFTC Form CPO-PQR would be required only where a person or entity is trading swaps, and thus already has an LEI as required by regulation. CPOs and their pools will not be required to obtain LEIs if they are not trading swaps.

If adopted, the CFTC anticipates that the elimination of existing pool-specific reporting requirements in Schedules B and C will focus CFTC Form CPO-PQR on data elements that facilitate the CFTC’s oversight of CPOs and their pools, while reducing overall data collection requirements for market participants in favor of relying on data the CFTC already receives from other sources.