CFTC Proposes to Simplify Regulatory Obligations for CPOs and CTAs

Dorothy Mehta Commentary by Dorothy Mehta

Based on the information and suggestions that the CFTC received as part of its Project KISS, the CFTC proposed simplifying regulatory obligations for CPOs and CTAs by codifying staff advisories and no-action letter relief in the CFTC Part 4 regulations.

The CFTC proposed: (i) registration exemptions for CPOs that solicit and/or accept funds from only non-U.S. persons for participation in offshore commodity pools, (ii) allowing the U.S.-based CPO of an offshore commodity pool with U.S. participants to maintain the commodity pool's original books and records in the offshore location of the pool, (iii) CPO and CTA registration exemptions for qualifying family offices, (iv) prohibiting persons statutorily disqualified from registration as CPOs from claiming or affirming CPO registration exemptions, (v) amendments permitting general solicitation by CPOs, (vi) providing exclusionary relief for business development companies and (vii) streamlining amendments as to Forms CPO-PQR and CTA-PR.

Commentary

All in all, this is a positive step forward by the CFTC. The unanimous adoption of the rule proposals reflects the strong groundwork previously laid down by CFTC Chair Giancarlo in Project KISS. The CPO/CTA proposals codify staff advisories and no-action letters and, thus, give certainty in areas that were potentially gray and left to judgment. Reporting obligations for certain CPOs and CTAs also are lessened. As proposed, the only potential areas of controversy are the annual affirmation processes for those not previously subject to this process and the prohibition on those statutorily disqualified from CPO registration claiming an exemption.

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