CFTC Staff Expands No-Action Relief for QEP Fund Managers

The CFTC’s Market Participants Division ("Division") reissued and expanded qualified eligible person ("QEP") no-action relief for private fund managers.

The Division is modifying the relief to accommodate delegation arrangements addressed in a prior staff no-action letter. As revised by CFTC Letter 26-06, CFTC Staff Letter 25-50 expands the relief to preserve delegation arrangements established by CFTC Staff Letter 14-126. The modification ensures that a "Delegating CPO" (commodity pool operator) remains eligible for relief under Letter 14-126 even if its "Designated CPO" relies on the new QEP no-action position rather than maintaining full registration.

The revised letter provides that the Division will not recommend that the CFTC take enforcement action against an SEC-registered investment adviser that fails to register as a CPO or CTA, or withdraws from such registration, provided it operates privately offered pools and reasonably believes that each participant qualifies as a QEP. The relief also confirms that CPOs relying on this position are not subject to the mandatory redemption requirements of Regulation 4.13(e) ("Exemption from registration as a commodity pool operator"), thereby functionally restoring much of the rescinded "QEP Exemption" on an interim basis pending potential future Commission rulemaking.

Under the terms of the relief, the CPO must comply with specific conditions, including (i) being registered with the SEC as an investment adviser, (ii) offering pool interests exempt from Securities Act registration without public marketing, subject to a Rule 506(c) ("Exemption for limited offers and sales without regard to dollar amount of offering") exception, and (iii) filing Form PF with the SEC. 

To claim the relief, the CPO must file a notice of reliance with the Division via email and reasonably believe at the time of investment (or at the time of reliance) that each pool participant meets the definition of a QEP.