CFTC Proposes CPO, CTA Registration Exemption for SEC-Registered Advisers
Commentary by Steven Lofchie
The CFTC proposed amendments to its registration requirements that would exempt qualifying SEC-registered investment advisers from registering as commodity pool operators ("CPOs") and commodity trading advisers ("CTAs"), and increase the capital contribution threshold for the small pool exemption.
In the proposal, the CFTC sought to reduce duplicative regulation for private fund managers, citing requests from industry groups including the Managed Funds Association and the Trump administration's deregulatory executive orders.
The proposal would create a new CPO registration exemption under CFTC Rule 4.13 ("Exemption from registration as a commodity pool operator") for SEC-registered investment advisers operating commodity pools limited to sophisticated investors. To qualify, the pool interests must be privately offered, participants must meet qualified eligible person or accredited investor criteria, and the adviser must file Form PF where required. The exemption would codify, with modifications, the no-action relief granted in CFTC Letter 25-50 (see prior coverage) and restore a version of an exemption the CFTC rescinded in 2012. The agency is separately asking whether it should also address the CPO delegation arrangements covered by CFTC Letter 26-06 (see prior coverage).
The Commission also proposed expanding the existing CTA registration exemption under CFTC Rule 4.14(a)(8) ("Exemption from registration as a commodity trading advisor") to cover investment advisers whose commodity interest trading advice is directed solely to CPOs claiming the new exemption.
Additionally, the proposal would amend the small pool exemption to increase the total gross capital contributions threshold from $400,000 to $800,000 to account for inflation since 2003. The existing 15-participant limit would remain unchanged.
The CFTC proposed conforming amendments to restore electronic-notice-filing references and extend redemption-right and disclosure requirements to pools transitioning under the new exemption.
Comments are due 45 days after publication in the Federal Register.
Commentary
Nice example of getting rid of duplicative regulatory requirements that are created by the fact that the United States has so many separate regulators, each with its own not-entirely-separate jurisdiction.
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