CFTC Issues Three No-Action Letters Granting Relief to CPOs from Annual Financial Report Filings (CFTC Letters 14-09, 14-10, and 14-11)

The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") issued three separate no-action letters providing relief to CPOs regarding the filing of their annual financial statements and reports, pursuant to CFTC Rule 4.7(b)(3) ("Exemption from Certain Part 4 Requirements for Commodity Pool Operators with Respect to Offerings to Qualified Eligible Persons and for Commodity Trading Advisors with Respect to Advising Qualified Eligible Persons") and Rule 4.22(d) ("Reporting to Pool Participants").

CFTC Letter 14-09 granted relief to a CPO that requested exemption from the requirement of CFTC Rules 4.7(b)(3) and 4.22(d) to have an independent public accountant audit the financial statements in the Pool's annual report for the fiscal year ending December 31, 2013. The CFTC granted the relief provided that the CPO files with the National Futures Association ("NFA") and distributes to the Pool participants an annual report for the Pool that otherwise complies with CFTC Rules 4.7(b)(3) and 4.22(d). The CFTC noted that although an original, signed waiver statement in support of an exemption request is generally required, given the proprietary nature of the Pool, it is not necessary to submit a waiver statement from the Pool participants.

CFTC Letter 14-10 granted relief to a CPO to use Luxembourg generally accepted accounting principles ("Luxembourg GAAP") in lieu of U.S. generally accepted accounting principles ("U.S. GAAP") in the preparation of the financial reports for the Pool. CFTC Rule 4.7(b)(3) states that a CPO of a pool operated pursuant to Rule 4.7 must provide participants with annual financial reports prepared and presented with U.S. GAAP. However, the DSIO made relief available on a case-by-case basis conditioned upon the offshore pool following additional elements now required by CFTC Rule 4.22(d)(2)(i) with respect to the use of International Financial Reporting Standards ("IFRS"). According to the CFTC, the CPO has represented that the Pool's financial statements satisfies 4.22 requirements with respect to the use of Luxembourg GAAP in lieu of IFRS.

CFTC Letter 14-11 also granted relief to a CPO from the requirement to have an independent public accountant audit the financial statements of each Pool's annual report pursuant to CFTC Rules 4.7(b)(3)(i) and 4.22(d) for the fiscal year ending on December 31, 2013. According to the letter, the CPO states that the Pools are segregated portfolios in two separate portfolio companies organized under the laws of the Cayman Islands with limited liability amongst the segregated portfolios. The CFTC granted the relief provided that the CPO files with the NFA and distributes to participants of each Pool an annual report with unaudited financial statements that covers the period from October 1, 2013 to December 31, 2013, as well as an annual report with audited financial statements that covers the period from October 1, 2013 to December 31, 2014 within 90 calendar days after the end of the Pool's 2014 fiscal year.

See: CFTC Letter 14-09; CFTC Letter 14-10; CFTC Letter 14-11. See generally: Disclosure, Reporting, and Recordkeeping Chapter of Lofchie's Guide to CPO CTA Regulation (accessible to Cabinet subscribers only). Related news:CFTC Issues Exemptive Letter Regarding Annual Report Filing Deadline for CPO (CFTC Letter 14-06) (January 24, 2014).