On February 9, 2012, the Commodity Futures Trading Commission (the "Commission" or "CFTC") announced its adoption of extensive amendments to the Part 4 rules, which govern the operations and activities of commodity pool operators ("CPOs") and commodity trading advisors ("CTAs") under the Commodity Exchange Act. Most significantly, the amendments rescind the exemption from CPO registration in Rule 4.13(a)(4); require annual filing of notices claiming exemptive relief under various provisions of the Part 4 rules; include new risk disclosure requirements for CPOs and CTAs regarding swap transactions where applicable; and modify the criteria for claiming relief under Rule 4.5, the CFTC's "not a pool" rule for certain investment companies registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940. The Commission, however, has retained the exemption from CPO registration in Rule 4.13(a)(3), which is available for privately offered funds that engage in a limited amount of commodity interest transactions.
The amendments also include new reporting requirements for registered CPOs and CTAs with respect to their direction of commodity pool assets similar to the SEC's Form PF, with streamlined and simplified reporting for CPOs and CTAs who are also registered investment advisers under the Investment Advisers Act of 1940 and who file Form PF with the SEC. In addition, the Commission issued a proposed rule for public comment which seeks to harmonize CFTC and SEC disclosure and reporting requirements for registered investment advisers who would be required to register as CPOs under the amendments to Rule 4.5 in respect of certain registered investment companies.
Certain provisions will become effective sixty days after publication in the Federal Register and other provisions have subsequent effective dates, and the timeline for compliance with the various rules and rule amendments also differs. For example, CPOs who currently rely on Rule 4.13(a)(4) with respect to their funds will have until December 31, 2012 to comply with the rescission of Rule 4.13(a)(4) with respect to those funds.
We will prepare and circulate a more detailed Clients and Friends Memorandum on these developments.
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