On August 13, 2013, the Commodity Futures Trading Commission (the “CFTC”) adopted final rule amendments to accept compliance with the disclosure, reporting and recordkeeping rules of the Securities and Exchange Commission (the “SEC”) as substituted compliance for substantially all of Part 4 of the CFTC’s Regulations, which is applicable to commodity pool operators (“CPOs”) of funds registered as investment companies (“RICs”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The adopting release widens the approach set forth in the harmonization proposals issued by the CFTC in February 2012 and provides, among other things, that if the CPO of a RIC satisfies all applicable SEC rules for such a fund as well as certain other conditions, the CPO will be deemed in compliance with certain CFTC rules. Contemporaneously with the CFTC’s adoption of the harmonization rules, the SEC’s Division of Investment Management issued a Guidance Update that provides a summary of the Division’s views on the disclosure obligations of an investment adviser to a RIC that trades in commodity interests, including futures and swaps, and on related compliance issues.
The majority of the harmonization rules became effective on August 22, 2013. However, while the harmonization rules provide relief for registered CPOs of RICs with respect to most of the compliance obligations under Part 4 of the CFTC’s Regulations, the rules do not address all the requirements with which registered CPOs must comply. As a result, it is a good time now for CPOs, as well as commodity trader advisers (“CTAs”), to review the disclosure obligations under Part 4 of the CFTC’s Regulations, as well as the rules regarding advertising materials.
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