CFTC Adopts New CPO Rules for Registered Investment Companies and Others

December 01, 2013

The U.S. Commodity Futures Trading Commission ("CFTC") has released its "Final Rule" to harmonize CFTC disclosure, reporting, and recordkeeping requirements with parallel U.S. Securities and Exchange Commission ("SEC") requirements for registered investment advisers ("RIAs") also required to register as commodity pool operators ("CPOs") with respect to their operation of certain investment companies ("registered funds") registered under U.S. Investment Company Act of 1940 as amended ("1940 Act"). The Final Rule was needed because, in 2012 as discussed below, the CFTC reinstituted commodity interest trading thresholds and marketing restrictions for registered funds seeking to rely on the exclusion from the definition of a CPO that had not existed since 2003. In the interim decade the CFTC and SEC regimes had developed separately creating duplicative and conflicting regulatory obligations. In the Final Rule, the CFTC substantially changed course from the "Proposed Rule." In summary, the Final Rule is "grounded in the concept of substituted compliance" but is not without some additional operational obligations, and it does not address all issues related to this new "harmonized" regime.

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