CFTC's Division of Swap Dealer and Intermediary Oversight Issues Time-Limited No-Action Relief to Certain CPOs and CTAs to Meet Registration and Compliance Obligations


[authors: Peter J. Shea, Ray mond Mouhadeb]

On July 13, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) provided a limited time period of no-action relief for commodity pool operators (CPOs) and commodity trading advisors (CTAs) who must register and comply with certain requirements due to amendments to CFTC Rules 4.5 and 4.13.

In February, the CFTC adopted amendments requiring advisers of registered investment companies (registered funds) who were previously excluded from registration under Rule 4.5 to comply with amended Rule 4.5 or register upon the later of (1) December 31, 2012 or (2) 60 days after the CFTC adopts final rules defining the term “swap.”

In the same release, the CFTC rescinded the CPO and CTA registration exemption provided by Rule 4.13(a)(4), which, among other requirements, generally exempted from registration advisers of private funds (private pools) offered to “qualified eligible persons” (and non-natural persons who were “accredited investors”). The amendment to Rule 4.13 required advisers to private pools previously relying on Rule 4.13(a)(4) exemptions to claim another exemption or register by December 31, 2012.

Prior to the no-action relief on July 13, advisers of new registered funds and private pools that had not claimed an exemption prior to the effective date of the Rule 4.5 and 4.13 amendments would have needed to immediately claim an exemption or register as a CPO or CTA.

DSIO deemed it proper to set one compliance date for all similarly situated CPOs and CTAs. As such, DSIO has granted no-action relief for CPOs and CTAs of new registered funds and private pools launched after the issuance of the no-action letter for failure to register as CPOs or CTAs until December 31, 2012, as long as such CPOs and CTAs comply with certain requirements. A CPO or CTA who meets such requirements must file a claim for use of the no-action relief, which must include certain information. Provided that the claim is materially complete, the claim will be effective once filed.

Additionally, in the no-action letter, DSIO decided not to delay the inclusion of swaps within the trading threshold calculation past December 31, 2012 since the further definition of “swap” was adopted on July 10, providing CPOs and CTAs adequate time to perform such calculations before December 31, 2012. Furthermore, DSIO does not think the margin requirements for uncleared swaps need to be finalized in order to comply with the inclusion of swaps within the threshold.

To view the CFTC no-action letter, click here.

To view the related CFTC press release on July 13, 2012, click here.

To view Katten Muchin Rosenman LLP’s Client Advisory on February 22, 2012 regarding amended Rule 4.5, click here.


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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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