Fund Managers Alert: CFTC Rescinds Exemptions and Expands its Regulations
The U.S. Commodity Futures Trading Commission (“CFTC”) recently announced the adoption of significant amendments to its rules which govern commodity pool operators and commodity trading advisors under the U.S. Commodity Exchange Act. Most significantly, the amendments eliminate the Rule 4.13(a)(4) exemption from registration as a CPO, which has been commonly relied on by the managers of many privately offered funds, including hedge fund and private equity fund sponsors. The elimination of the 4.13(a)(4) exemption, together with the expected adoption of CFTC regulations that will broadly include swaps as instruments that will cause any investment vehicle holding them to be deemed a “commodity pool” subject to CFTC jurisdiction (and the short timeline for compliance with CFTC regulations that is expected to follow the issuance of such regulations) require immediate attention from all fund managers, including hedge fund managers, private equity managers, fund of funds managers and others, irrespective of the structure or strategy of their investment vehicles.
This memorandum briefly summarizes the amendments and discusses requirements to register as a CPO and CTA in accordance with the amended rules.