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CFTC Publishes FAQs on Compliance Obligations for CPOs and CTAs

This week the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) published a set of Frequently Asked Questions (FAQs) addressing compliance obligations for Commodity Pool Operators (CPOs) and Commodity Trading Advisors (CTAs). The FAQs address a number of concerns raised by market participants since CFTC’s adoption of new regulations pursuant to Dodd-Frank. The issues addressed in the FAQs include clarification on what entities must register under the new rules, specific compliance dates, and the process for transitioning from the eliminated exemption under Rule 4.13(a)(4). Of note:
  • The FAQs specifically provide that CPOs of fund-of-funds may continue to rely on Appendix A to Part 4, which was eliminated by in the final rules that were published in March and had provided fund-of-funds with guidance for reliance on the limited trading exemption under Rule 4.13(a)(3). CFTC watchers have reported that a replacement for Appendix A is likely to be released this year, but the new FAQ makes clear that fund-of-funds may still rely on Appendix A to determine if they meet the limited trading exemption until that occurs.
  • The DSIO guidance clarifies that CPOs that claimed relief from registration under Rule 4.13(a)(4) (the eliminated “sophisticated investor” exemption that was tied into the Section 3(c)(7) qualified purchaser exclusion under the Investment Company Act of 1940) prior to April 24, 2012 must register or claim exemption under the limited trading exemption by December 31, 2012.
  • CPOs transitioning from the 4.13(a)(4) to the exemption under 4.13(a)(3) must submit a written request to the National Future Association (NFA) to withdraw the exemption. Once that withdraw is finalized, the CPO may file the exemption electronically. The CPO also must provide notice to its participants of its change in exemption status.

For further information about CFTC regulatory compliance, or any other securities law concern, please contact us at (619)298-2880.

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