CFTC Grants Registration Deadline Extension for Operators of Funds of Funds

The CFTC issued time limited no-action relief to fund of funds operators, extending the deadline for registration provided that certain conditions are met. New Deadline

Enforcement action would not be recommended against the commodity pool operator (CPO) of a fund of funds for failure to register until the later of June 30, 2013, or six months after the effective date (or compliance date, if later) of any revised guidance that the CFTC issues regarding the application of the de minimis thresholds to funds of funds in the context of CFTC regulations 4.5 and 4.13(a)(3).

Please note that the deadline is the date by which the registration must be complete, not the date for merely submitting the application to register.  The CFTC registration process is quite involved and can take many weeks to complete.  Several steps are involved, including preparing and filing applications, studying for proficiency examinations (e.g., Series 3 or Series 32 examinations) and passing them, undergoing background checks, submitting fees and completing fingerprint cards.  Importantly, a firm's registration is not complete until the NFA reviews and approves it.

Required Conditions for No-Action Relief Eligibility

1)  The fund of funds does not invest directly in commodity interest positions in excess of the levels set forth in CFTC Rules 4.5 or 4.13; 2)  the CPO does not know and could not reasonably know that the fund of funds' indirect exposure to commodity interests exceeds the levels set forth in CFTC Rules 4.5 or 4.13 or in the prior Appendix A, and; 3)  the fund of funds is either a registered investment company under the Investment Company Act of 1940 or is compliant with the other provisions of CFTC Rule 4.13(a)(3), so the investor suitability requirements and offering and marketing restrictions must be satisfied.

Action Required to Claim the Relief

The CPO must state that it is eligible for the no-action relief in an electronic filing with the CFTC by December 31, 2012.

NOTE:  We recommend that clients continue to prepare for registration so that all requirements are satisfied and to avoid any unexpected issues or delays that may arise in this continuously changing regulatory environment.

Cheryl Spratt