CFTC Revision of Rule 4.5 Requires Advisers to Certain Registered Investment Companies to Register with the CFTC; CFTC Separately Proposes to Harmonize Investment Company Rules with SEC Requirements

more+
less-

Rule 4.5 Amendment. On February 9, the Commodity Futures Trading Commission (CFTC) adopted final amendments to its Part 4 Rules, which set out the registration and compliance obligations for commodity pool operators (CPOs) and commodity trading advisors (CTAs). CFTC Rule 4.5 formerly provided a blanket exemption from CFTC registration and associated regulatory requirements for registered investment companies and their advisers. Amended Rule 4.5 is a step back to the rule as it existed before 2003, with certain modifications, where an adviser of a registered fund that trades over a de minimis amount of futures contracts, options on futures or swaps (Derivatives) or otherwise markets the fund as a commodity fund will be required to register as a CPO.

To qualify for the new Rule 4.5 CPO exception, an investment company’s adviser must represent to the CFTC that the fund will only use Derivatives solely for “bona fide hedging purposes.” That term is narrowly construed and does not include strategies that are commonly referred to as “risk management.” The adviser to a registered fund that cannot qualify for the bona fide hedging exemption will be subject to CPO registration requirements unless the fund otherwise uses Derivatives within either of the following thresholds...

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Published In: Administrative Agency 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.

© Katten Muchin Rosenman LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »