CFTC adopts significant changes to CPO and CTA registration and compliance requirements

Abstract

Purpose

The purpose of this paper is to explain the final rules adopted by the Commodity Futures Trading Commission (CFTC) on February 9 amending its Part 4 regulations governing commodity pool operators (CPOs) and commodity trading advisors (CTAs).

Design/methodology/approach

The paper explains, among other things, changes to CPO registration exemptions, additional reporting obligations for registered CPOs and CTAs, the imposition of new requirements for registered CPOs relying on certain exemptions, to provide annual financial statements, required risk disclosures regarding swap transactions, required annual affirmation and eligibility for exemptions and exclusions from CPO and CTA registration, and an initiative to harmonize CPO reporting, disclosure, and recordkeeping requirements of the CFTC and the SEC for registered investment companies.

Findings

Since the adoption of Rule 4.13(a)(4) in 2003, fund sponsors have frequently relied on the exemption made available by that rule to avoid both registration with the CFTC as CPOs and compliance with the CFTC's disclosure, reporting and recordkeeping requirements. The CFTC has now rescinded that exemption.

Practical implications

All advisers to registered investment companies need to evaluate their exposure to CFTC regulation after this rule amendment.

Originality/value

The paper provides practical guidance from experienced financial services lawyers.

Citation

Rosenzweig, K.M., Cohen, W.E., Okoshi, M.S. and Santo, F.M. (2012), "CFTC adopts significant changes to CPO and CTA registration and compliance requirements", Journal of Investment Compliance, Vol. 13 No. 2, pp. 15-19. https://doi.org/10.1108/15285811211238101