CFTC Staff Extends Relief to Certain RIAs Operating Private Commodity Pools

Summary

On December 19, 2025, the Market Participants Division (the “MPD”) of the CFTC issued no-action relief¹ to CPOs registered with the SEC as investment advisers, with respect to the operation of certain commodity pools whose interests are offered solely to QEPs.

The relief has the substantive effect of reinstating the CFTC Regulation 4.13(a)(4) Exemption. Unlike CFTC Regulation 4.13(a)(3), which many private fund managers rely on to avoid registration with the CFTC as CPOs, the CFTC staff’s relief does not impose de minimis trading thresholds, but it does impose certain conditions that were not requirements of the CFTC Regulation 4.13(a)(4) Exemption.

The CFTC’s relief is only available to investment advisers registered with the SEC, and only available with respect to privately offered funds that only admit QEPs (generally, this corresponds to private funds that rely on Section 3(c)(7) of the Investment Company Act of 1940, as amended (the “1940 Act”)). Additionally, an adviser seeking to rely on the relief must ensure that the pool is reported on the SEC’s Form PF and file a notice with the CFTC staff documenting reliance on the no-action position. Any CPO that meets these conditions may also decline to register or withdraw from registration as a CTA solely with respect to the pools for which the CPO relies on the no-action position, and would be excused from providing a right of recission to pool investors if it deregisters with the CFTC as a CPO in reliance on the relief.

The CFTC staff’s no-action position will provide welcome relief from overlapping SEC and CFTC regulation for fund managers that are currently registered with the CFTC solely because they sponsor private funds that make significant use of derivatives. However, as described herein, the relief is less helpful to CPOs and CTAs that trade derivatives for other types of investment products, and there are several practical implications that CPOs should consider before choosing to rely on the relief.

Practical Implications

The relief provided by CFTC Staff Letter No. 25-50 (“CFTC Letter 25-50”) allows greater flexibility with respect to the commodity interest trading activity of certain commodity pools managed by a person who is registered with the SEC as an investment adviser and reports information about those commodity pools to the SEC on Form PF.

Although the conditions of the relief are similar to those for the CFTC Regulation 4.13(a)(4) Exemption,² CFTC Letter 25-50 imposes certain new conditions not found in the rescinded CPO registration exemption. The relief is only available to a registered investment adviser that files a Form PF with respect to the pools covered by the no-action position. A pool whose interests are sold exclusively to QEPs, however, would not necessarily be a private fund required to be reported on Form PF. For example, a pool that is excluded from the definition of investment company under Section 3 of the 1940 Act, for any reason other than reliance on Section 3(c)(1) or 3(c)(7) of the 1940 Act would not need to be reported on Form PF. Accordingly, an adviser would not be able to avail itself of the relief in CFTC Letter 25-50 as to that pool.

CPOs who proceed to rely on CFTC Letter 25-50 will also face certain practical considerations:

• Unless the National Futures Association (“NFA”) reflects no-action relief requests sent to the CFTC staff via e-mail in the NFA BASIC system, reliance on the relief will introduce extra steps in various market participants’ NFA Bylaw 1101 due diligence. This could slow down a commodity pool’s investment in another commodity pool operated by a registered CPO, setting up futures trading with a registered futures commission merchant and hiring a third-party registered CTA to advise the pool.³
• The NFA Member Questionnaire will need to be updated to ensure CPOs may delete pools they currently operate under CFTC Regulation 4.7(b) without the NFA EasyFile system’s generating a “call” for an audited liquidation report filing for the pool.
• These CPOs will need to have a reasonable belief at the time of an investor’s investment, or at the time of the CPO’s relying on the no-action relief, that each investor is a QEP. This process is addressed through the subscription process, and for subsequent investments, the additional subscription form submitted by the investor typically contains a bring-down of the representations made in the subscription agreement, including as to the investor’s suitability. It is unclear from the wording of CFTC Letter 25-50 whether the CFTC staff meant to require that a CPO re-confirm QEP status of investors at the time the CPO converts from operating a commodity pool under CFTC Regulation 4.7(b) to operating under the relief, or whether the reasonable belief formed from any previously-received subscription materials is adequate.
• CPOs who had previously drafted private placement and other offering memoranda containing the CFTC Regulation 4.7(b)(2)(i) front page disclaimer will need to amend the document for use with prospective investors, and will need to update any statements regarding the CPO being registered therein. There is no explicit requirement to notify existing investors of the change, but it would generally be good practice to do so.

CTAs will also have certain issues with which to grapple:

• CFTC Letter 25-50 does not provide CTA registration relief for a CTA unless that CTA is also the CPO of the relevant commodity pool. CFTC Letter 25-50 would not change the CTA registration or exemption analysis for a third-party CTA to a commodity pool whose CPO claims the relief. CPOs that rely on the relief and are also registered CTAs because of their third-party pool and separately managed account businesses will need to remain registered as CTAs and remain NFA members.
• A CTA advising a commodity pool that is not a “qualified purchaser” (as defined in Section 2(a)(51)(A) of the 1940 Act) and whose CPO claims the relief may need to refresh its own due diligence on the QEP status of the pool if the CTA would like to continue to advise the commodity pool under the CFTC Regulation 4.7(c) operational exemption. If the commodity pool has qualified as a QEP by merit of being an “exempt pool” under CFTC Regulation 4.7(a)(6)(i)(P), it will no longer be a QEP under that prong of the definition.

CPOs that determine to operate commodity pools under the relief and/or de-register entirely as CPOs, as well as CTAs that determine to deregister entirely as CTAs, will need to consider the potential unintended consequences for purposes of complying with the rest of the Commodity Exchange Act, as amended (the “CEA”), CFTC regulations outside of CFTC Part 4 and the availability of certain other CFTC relief that has been issued in the interim since 2012 (i.e., “eligible contract participant” qualification for commodity pools trading swaps and security-based swaps; qualification for certain exemptions from CFTC position limit aggregation, etc.).

Background

In 2012, the CFTC rescinded the CFTC Regulation 4.13(a)(4) Exemption, which generally applied to managers of commodity pools⁴ where the investors were limited to certain sophisticated, often institutional persons, deemed to be QEPs in an offering exempt from registration under the 1933 Act).⁵ The CFTC Regulation 4.13(a)(4) Exemption had not contained any limit on commodity interest trading in such a fund or any restriction on marketing the fund as a means to obtain commodity interest market exposure. Following the CFTC Regulation 4.13(a)(4) Recission, many asset managers in the United States and those outside the United States accepting U.S. person investors in these commodity pools were forced to register with the CFTC as CPOs and become members of the NFA. This meant that, after the CFTC Regulation 4.13(a)(4) Recission, CPOs that had been previously registered but were operating commodity pools under the CFTC Regulation 4.13(a)(4) Exemption could only avail themselves of certain limited remaining operational exemptions under CFTC Regulation 4.7, which imposed additional requirements.⁶ Some, but not all, of these impacted commodity pools found that they could meet one of two de minimis commodity interest trading tests and a marketing restriction, and thus qualify the CPO for the CFTC Regulation 4.13(a)(3) CPO registration exemption, but compliance with CFTC Regulation 4.13(a)(3) requires ongoing monitoring of trading positions.⁷

The CFTC rescinded the CFTC Regulation 4.13(a)(4) Exemption under the theory that the sources of risk associated with private funds were also associated with commodity pools.⁸  Accordingly, any sponsor of a private pool that was unable to rely on another CPO registration exemption was required to register with the CFTC and become subject to disclosure, reporting, recordkeeping, advertising and compliance requirements.

Over the course of 2025, both the Managed Funds Association (the “MFA”) and the Alternative Investment Management Association petitioned the CFTC for a formal rulemaking that would reinstate the CFTC Regulation 4.13(a)(4) Exemption and for corresponding exemptions for CTAs.⁹ On September 7, 2025, the CFTC published its Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions, and listed in that agenda was reference to a plan to propose a rulemaking that appeared to be responsive to these requests.  In mid-December 2025 in a letter to Thomas Smith, Acting Director of the CFTC’s Market Participants Division, the MFA requested narrower interim no-action relief than the MFA had originally requested, recognizing that formal rulemaking can take months, if not years.

CFTC Staff Letter No. 25-50

On December 19, 2025, the MPD issued CFTC Letter 25-50 to the MFA as an “interim measure to reduce the burdens on certain private fund managers to institutional and high net worth individuals” while the CFTC considers whether to complete formal rulemaking to reinstate the CFTC Regulation 4.13(a)(4) Exemption.

In requesting the relief, the MFA argued that:¹⁰

• Relief permitting managers of commodity pools whose investors all meet the QEP definition (“QEP Managers”) to withdraw from CPO and CTA¹¹ registration would eliminate duplicative, overlapping regulation and is wholly aligned with the presidential administration’s efforts in this regard.
• The policy goals furthered by permitting withdrawal from CPO and CTA registration for QEP Managers recognizes the sophistication of QEP investors and better harmonizes regulation with the SEC, thereby reducing unnecessary expenses and burdens.
• The policy arguments to rescind the CFTC Regulation 4.13(a)(4) Exemption have been disproven over time, addressed through other regulations or simply do not withstand scrutiny.

The MFA additionally argued that permitting QEP Managers to withdraw from CPO and CTA registration would:¹²

• Improve the efficiency and the integrity of the commodity and financial markets.
• Lower costs for investors and market participants thereby promoting liquidity in the commodity interest markets and facilitating hedging activities for investors.
• Streamline federal regulations and eliminate unnecessary and overreaching regulations.
• Reduce waste, promote innovation and enhance American competitiveness.

Pursuant to CFTC Letter 25-50, until such time as the CFTC promulgates rules, or publicly determines not to promulgate rules, addressing the reinstatement of the CFTC Regulation 4.13(a)(4) Exemption, the MPD will not recommend that the CFTC commence an enforcement action against any person that fails to register with the CFTC as a CPO, or withdraws from registration as a CPO, subject to the following conditions:

• The person is currently, or would be, until such time as the CFTC may promulgate regulations to reinstate the CFTC Regulation 4.13(a)(4) Exemption, required to be registered with the CFTC as a CPO for its commodity pool operations, or relies upon an existing exemption from such CPO registration in CFTC Regulation 4.13;
• The person is registered with the SEC as an investment adviser;
• The interests of the pool operated by the person are exempt from registration under the 1933 Act and sold without marketing to the public in the United States (provided, that the prohibition on marketing to the public shall not apply to a pool that is also offered pursuant to Rule 506(c) of Regulation D under the 1933 Act);
• The person reasonably believes at the time of investment, or at the time of relying on the no-action position from CPO registration, that each pool participant meets the QEP definition under CFTC Regulation 4.7(a)(6);
• The person files a Form PF¹³ with the SEC with respect to the pool(s) covered by the no-action position, which filing is received by the CFTC;¹⁴ and
• The person complies with the requirements of CFTC Regulations 4.13(b) (except 4.13(b)(2)) and 4.13(c) as if reliance on the no-action position were an exemption from registration under 4.13(a), with the exception that notices documenting reliance on this no-action position are filed via e-mail to mpdnoaction@cftc.gov (a “QEP No-Action CPO”).¹⁵

Solely with respect to the pools for which a QEP No-Action CPO qualifies for the no-action position and for which the QEP No-Action CPO chooses to rely on CFTC Letter 25-50, the QEP No-Action CPO may also rely on it to avoid or withdraw from registration as a CTA.

Helpfully, the MPD additionally confirmed that a QEP No-Action CPO relying on CFTC Letter 25-50 would not be required to comply with the requirements of CFTC Regulation 4.13(e)(2) solely with respect to pools for which the QEP No-Action CPO is relying on this no-action position, meaning that, if a registered QEP No-Action CPO converts to operating commodity pools under CFTC Letter 25-50, that QEP No-Action CPO does not need to give investors a right of recission. The need for a right of recission would have been a concern had the CPO been converting from operation of a commodity pool in its registered CPO capacity to operation under CFTC Regulation 4.13,¹⁶ something that, if it had applied in this no-action situation, would have made use of the relief untenable.

Availability of CFTC Letter 25-50 to Non-MFA Members

Similar to other relief recently issued by the CFTC staff with respect to the multiplicity of U.S. person definitions,¹⁷ the MPD issued CFTC Letter 25-50 as no-action relief binding on the issuing Division, the MPD. The MFA had requested exemptive relief under CFTC Regulation 140.99(a)(1) which would have been binding on both the CFTC and the MPD. However, the CFTC staff couched the relief as no-action instead (only binding on the MPD). Under CFTC Regulation 140.99(a)(2), a “no-action letter binds only the issuing Division or the Office of the General Counsel, as applicable, and not the CFTC or other CFTC staff. Only the Beneficiary may rely upon the no-action letter.” As the issuer of CFTC Letter 25-50, only the MPD is bound by this position, and technically, only members of the MFA are the Beneficiaries. However, as with other recently issued relief, it would be reasonable to interpret the relief granted in CFTC Letter 25-50 as intended to be available to be relied on by any person. Although this position is a reasonable one to take, it is not fully supported by regulation and as such may not offer the desired level of comfort to those market participants who are not members of the MFA but who wish to rely on CFTC Letter 25-50.

Appendix A

Qualified Eligible Persons

Under CFTC Regulation 4.7, the definition of QEP has two “classes” of persons: one that must satisfy a “Portfolio Requirement” and one that does not. The Portfolio Requirement can be met by meeting a $4,000,000 securities portfolio test, a $400,000 initial margin and premium test, or a combined test (e.g., a portfolio whose funds and property meet 50% of each test) such that:

• The person owns securities (including pool participations) of issuers not affiliated with such person and other investments with an aggregate market value of at least $4,000,000 (the “Securities Portfolio Test”).
• The person has on deposit with a futures commission merchant for its own account at any time during the six-month period preceding either the date of sale to that person of a pool participation in the exempt pool or the date that the person opens an exempt account with the CTA, at least $200,000 in exchange-specified initial margin and option premiums, together with required minimum security deposit for retail forex transactions for commodity interest transactions (the “Initial Margin and Premium Test”).
• The person owns a portfolio comprised of the funds and property described the Securities Portfolio Test and Initial Margin and Premium Test, in which the sum of the funds or property includable under the Securities Portfolio Test, expressed as a percentage of the minimum amount required thereunder, and the amount of initial margin, option premiums, and minimum security deposits includable under the Initial Margin and Premium Test, expressed as a percentage of the minimum amount required thereunder, equals at least 100%.¹⁸

The class of persons subject to the Portfolio Requirement to qualify as QEPs includes, among others, registered investment companies, business development companies, insurance companies, state pension plans, ERISA plans, non-profits, operating companies and individuals who are accredited investors.

The class of investors not subject to the Portfolio Requirement to qualify as QEPs includes, among others, any “qualified purchaser” (as defined in Section 2(a)(51)(A) of the 1940 Act), “knowledgeable employee” (as defined in Rule 3c-5 under the 1940 Act) or “non-United States person.” This class also includes any CPO, CTA or investment adviser that (i) has been registered and active as such for two years, and (ii) operates pools that in the aggregate have total assets in excess of $5,000,000, provides commodity interest advice to commodity accounts that in the aggregate have total assets in excess of $5,000,000 deposited at one or more futures commission merchants, or provides securities investment advice to securities accounts that in the aggregate have total assets in excess of $5,000,000 deposited at one or more registered securities brokers, respectively.