CFTC Alert: Fund Exemptions May Be Eliminated

The Commodities Futures Trading Commission ("CFTC") recently issued proposals that would eliminate or narrow exemptions from registration and regulation currently available to investment funds.1 Many funds currently rely on such exemptions to avoid commodity pool operator ("CPO") and commodity trading advisor ("CTA") registration and the related regulatory requirements. The CFTC proposes to make the following amendments, among others:

  • Rescind registration exemptions available for CPOs offering commodity pools;
  • Require CPOs or CTAs claiming exemptive or exclusionary relief from registration to file annual notices;
  • Require CPOs and CTAs that are registered solely with the CFTC to file detailed reports regarding their commodity trading activities;
  • Amend the risk disclosure requirements in CPO and CTA documents to include descriptions of certain risks related to swap transactions; and
  • Implement a change to the reporting requirements and the criteria for participant qualifications for CPOs and CTAs relying on CFTC Regulation 4.7. 4

The CFTC has stated that the proposals are "consistent with the tenor of the provisions of the Dodd-Frank Act" even though they have not been mandated by Dodd-Frank. 5 If the proposals are enacted, the CFTC will have more oversight of market participants including registered and private funds participating in the commodity markets. Existing exemptions and exclusions to the current requirements remain available, as follows: (i) for CPOs due to (a) their financial or investment sophistication or regulatory status; (b) the relatively small size of the pool; and/or (c) the limited amount of commodity interest trading in the pool; and (ii) for CTAs where (a) the person is exempt from CPO registration and provides commodity trading advice to such exempt pools; (b) is registered in another capacity and provides commodity trading advice solely incidental to that principal business; or (c) has provided advice to a limited number of clients in the past year and did not hold itself out to the public as a CTA. The CFTC appears intent on eliminating the CPO and CTA exclusions and exemptions. However, the proposal is subject to a sixty (60) day comment period from the date the Proposing Release is published in the Federal Register. 6 We will endeavor to update our clients with additional information related to the proposal as it becomes available. Funds currently relying on an exemption from CPO or CTA registration should pay careful attention to CFTC proposals and notices on this topic.

If you have any questions concerning this Alert, please contact Daniel G. Viola at 212.573.8038 or


1.     See Commodity Pool Operators and Commodity Trading Advisors: Amendments to Compliance Obligations, 76 Fed. Reg. 7976. Released on January 26, 2011.

2.       See CFTC Regulations 4.13(a)(3) or 4.13(a)(4) or 4.14(a)(5). Rules can be found at the CFTC website:

3.       Id.

4.       Id.

5.       See, Dodd-Frank Wall Street Reform and Consumer Protection Act. See also, Proposing Release at

6.        Id.


Cheryl Spratt