The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) recently issued several letters affecting commodity pool operators (CPOs): 

  • JOBS Act Harmonization: On September 9, DSIO issued exemptive relief to permit CPOs that have claimed relief under CFTC Regulation 4.7(b), or an exemption from CPO registration under CFTC Regulation 4.13(a)(3), to engage in general solicitation and advertising in the marketing of their pools, consistent with the Jumpstart Our Business Startups Act (JOBS Act). This relief was necessitated by inconsistencies between these existing CFTC Regulations, which contained express prohibitions on public marketing, and the JOBS Act’s liberalization of the private placement regime under the Securities Act of 1933 (1933 Act) to permit general solicitation and advertising in certain circumstances. The CFTC relief is available to CPOs that are engaging in an offering pursuant to Rule 506(c) of Regulation D under the 1933 Act, or which use a reseller in reliance on Rule 144A under the 1933 Act. However, the relief is not self-effectuating, and must be claimed by filing a notice that includes required information with DSIO. Letter No. 14-116 is available here.
  • Consolidated Reporting: In CFTC Letter No. 14-112, DSIO extended certain reporting relief, which previously had been provided to CPOs of investment companies registered under the Investment Company Act of 1940 (ICA), to include CPOs of pools that are not registered under the ICA. The relief permits such CPOs to file a single consolidated annual report and Form CPO-PQR for a parent commodity pool (Parent Pool) and its wholly owned subsidiary (Trading Subsidiary), rather than requiring duplicative reporting by both pools. Pursuant to the relief, the consolidated annual report and Form CPO-PQR for the Parent Pool must also incorporate specified financial data for the Trading Subsidiary and, if the reporting requirements for the two pools differ, the CPO must comply with the more stringent requirements. To claim relief under Letter No. 14-112, a CPO must file a notice of claim that includes required information with DSIO. Letter No. 14-112 is available here.
  • Third-Party Recordkeeping: CFTC Exemptive Letter No. 14-114 expands the types of third-party recordkeepers that are permitted to retain required CPO books and records consistent with CFTC Regulations. In lieu of the approach currently codified in CFTC Regulations, which specify eligible third-party recordkeepers (including fund administrators and custodians), the relief would allow a CPO to use any third-party recordkeeper so long as that the CPO maintains timely access to such records and continues to timely and completely file statements required by CFTC Regulations. Letter No. 14-114 is available here.
  • Reporting for Exempt Pools: CFTC Exemptive Letter No. 14-115 provides CPO-PQR reporting relief to CPOs that are registered as such, but which solely operate pools pursuant to CFTC Regulations 4.5 or 4.13(a)(3) (exempt pools). Although DSIO observed that CFTC Regulations would technically require such CPOs to file Form CPO-PQR, it determined that relief from this requirement would be appropriate since such CPOs otherwise have no reporting obligations under Part 4 of the CFTC’s Regulations. This relief does not apply to a person that is otherwise required to be registered as a CPO. Letter No. 14-115 is available here.
  • Insurance Company General Accounts: In CFTC Interpretive Letter No. 14-113, DSIO confirmed that an entity formed by the aggregation of general account assets from multiple, commonly owned, state-regulated life insurance companies is not a commodity pool within the meaning of the Commodity Exchange Act. Letter No. 14-113 is available here.