CFTC Provides No-Action Relief for Business Development Companies (with Lofchie Comment)

The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") issued a no-action letter to operators of business development companies. The letter states that the DSIO will not recommend that the CFTC take action against the operators of business development companies for failure to register as CPOs under the CEA and CFTC rules thereunder, provided generally that they comply with the same conditions that would apply to ordinary registered investment companies, including compliance with a de minimis trading threshold.

Lofchie Comment: According to the CFTC's no-action letter (at least it is a no-action letter), an investment company that enters into a single swap is subject to regulation as a commodity pool. Leaving aside the question of whether this is correct as a statutory matter, is it good policy? Regulatory resources are not unlimited. Given all that the CFTC is charged with accomplishing, I just can't believe that the CFTC's regulation of, for example, SEC-registered funds that enter into a single swap is a good use of its resources. Part of being an effective regulator just has to include some decision-making as to what makes sense to regulate.

See: CFTC Letter 12-40: Parts 3 and 4; No-Action.