On July 13, the Commodity Futures Trading Commission (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter to grant relief to operators of, and advisers to, hedge funds and other private funds that invest in commodity futures, options and/or swaps (i.e., commodity interests). These operators and advisers will now have until December 31, 2012, to register with the CFTC as commodity pool operators (CPOs) and commodity trading advisors (CTAs), respectively, absent eligibility for an exclusion or exemption therefrom.

The DSIO’s no-action letter was issued in response to a joint request for no-action relief from the Managed Funds Association, the Investment Adviser Association, the Alternative Investment Management Association, and the Investment Company Institute (collectively, the Trade Associations), which was prompted by recent amendments to the CFTC’s CPO and CTA registration and compliance requirements. The amendments, which were adopted earlier this year and became effective on April 24, 2012, included, among other things, (1) the narrowing of the CFTC Rule 4.5 exclusion from CPO status for operators of registered investment companies that invest in commodity interests and (2) the repeal of CFTC Rule 4.13(a)(4), the so-called “sophisticated investor” exemption from CPO registration. The ultimate impact of these amendments is that operators of funds that invest in commodity interests that claimed the aforementioned exclusion or exemption prior to April 24, 2012, and were thus not required to register as CPOs, will now have to do so by December 31, 2012.2 The repeal of CFTC Rule 4.13(a)(4) also affected CTA registration requirements because previously, under CFTC Rule 4.14, persons eligible for the Rule 4.13(a)(4) exemption could claim exemption from CTA registration.

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