CFTC Issues FAQs Regarding Registration for CPOs and CTAs

August 21, 2012


On February 9, 2012, the Commodity Futures Trading Commission (CFTC” orCommission) issued a rule amending certain registration and compliance obligations for commodity pool operators (CPO”) and commodity trading advisors (“CTA”). (See February 22, 2012 Client Alert.) The rule significantly affects the investment strategies and registration practices of many funds transacting business in the commodities and swaps markets. (See August 16, 2012 Client Alert on Finalizing Swap Product Definition.)

On August 14, 2012, the Staff of the Commission’s Division of Swap Dealer and Intermediary Oversight (“Division”) issued responses to Frequently Asked Questions (“FAQs”) regarding the amendments. The FAQs are organized around common topics, such as Regulation 4.13, trading limits, liability for mutual fund directors and trustees, transitioning, and several others. The CFTC staff did not provide guidance at this time regarding Forms CPO-PQR and CTA-PR, but indicated that such guidance will be forthcoming. Summarized below are some of the CFTC’s responses related to compliance dates, registration, and claims for exemption.

Compliance Dates

  • CPOs that previously claimed an exemption under Regulation 4.13(a)(4) are required to register or submit a claim for an exemption under Regulation 4.13(a)(3) by December 31, 2012.
  • The compliance date for CPOs of registered investment companies to register with the Commission is December 31. The compliance date for CPO registration of advisers to new registered investment companies launched after April 24, 2012 but before December 31, 2012 is January 1, 2013.
  • A CPO that has claimed exemption from registration under Regulation 4.13(a)(4) and that launches a new pool that would also qualify under Regulation 4.13(a)(4) after the effective date of the rescission of the Regulation can operate the new pool without registering until December 31, 2012 by following the terms of a Notice of No Action relief granted by the Division on July 10, 2012. That No Action relief is not self-executing, and the entities that seek to claim its benefits must file a claim to perfect the use of the relief.
  • A CPO that claimed exemption under the 4.13 No Action relief for a pool must refile its exemption to designate operation pursuant to Regulation 4.13(a)(3). If the pool does not qualify for exemption under Regulation 4.13(a)(3), the CPO will be required to register with the Commission by December 31, 2012.

Registration and Exempt Status

  • A CPO of a pool that was previously exempt under the now-rescinded Regulation 4.13(a)(4) may claim relief under Regulation 4.7 even if the securities were sold, or the transactions entered, before the deadline to file the requisite notice.
  • A CPO operating pursuant to a Regulation 4.13(a)(4) exemption will not be required to reaffirm that all of the participants in an existing pool continue to meet the qualified eligible-person standard for the CPO to claim a Regulation 4.7 exemption. The CPO will, however, be required to ensure that any new participants meet the qualified eligible person standard at the time of their investment.
  • Exempt CPOs who wish to claim a Regulation 4.7 exemption on behalf of any of the pools that the CPO currently operates must apply for registration with the Commission and National Futures Association (“NFA”) membership. Such CPOs will need to withdraw the exemption under Regulation 4.13(a)(4) and file the new exemption under Regulation 4.7. Withdrawing the Regulation 4.13(a)(4) exemption prior to December 31, 2012, however, can subject the firm to financial reporting requirements under Commission and NFA regulations.
  • Exempt CPOs who wish to transition from being exempt under Regulation 4.13(a)(4) to being exempt under Regulation 4.13(a)(3) must submit a written request to the NFA to withdraw the Regulation 4.13(a)(4) exemption and, upon being contacted by the NFA and the withdrawal being finalized, may file the new exemption under Regulation 4.13(a)(3). The CPO must provide notice to participants of the change in exemption.

O’Melveny & Myers is available to advise private funds and registered investment companies to ensure compliance with the CFTC’s amended rules. For questions, please contact the attorneys listed above or any other O’Melveny & Myers attorneys with whom you ordinarily work on related matters.


This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Heather Traeger, an O'Melveny partner licensed to practice law in the District of Columbia and Texas, Timothy Clark, an O'Melveny partner licensed to practice law in New York, Kris Easter, an O'Melveny counsel licensed to practice law in Texas, and Lilit Voskanyan, an O'Melveny associate licensed to practice law in the District of Columbia and New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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