Part II: Proposal to Harmonize CFTC and SEC Requirements for Registered Investment Companies as Commodity Pools


Yesterday, the U.S. Commodity Futures Trading Commission (CFTC) announced the adoption of final rules that, among other things, limit the ability of registered investment companies (but not of other types of regulated entities, such as banks, pension funds, and insurance companies) to rely on the relief currently provided by CFTC Rule 4.5. Rule 4.5 currently excludes registered investment companies, banks, pension funds, and insurance companies from the definition of “commodity pool operator” and, thus, the compliance obligations applicable to commodity pool operators (CPOs). As a result, registered investment companies that conduct more than a de minimis amount of speculative trading in commodity interests, including through controlled foreign corporations (CFCs), are considered commodity pools andthe registered investment advisers that manage such registered investment companies must register as CPOs.

For those registered investment companies whose investment advisers will be required to register as CPOs, the CFTC concurrently proposed rulemaking intended to harmonize certain CFTC- and U.S. Securities and Exchange Commission (SEC)–imposed compliance requirements in an effort to mitigate the burden of complying with the two similar, but separate compliance regimes (the Proposed Harmonization Rule). The Proposed Harmonization Rule addresses each of the harmonization concerns raised by the National Futures Association (NFA) in its comment letter to the CFTC5 and focuses on the harmonization of certain requirements in three key areas: disclosure documents, periodic reports, and recordkeeping.

Please see full alert below for more information.

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