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

Abstract

Purpose

The purpose of this article is to explain the implications for registered fund advisors of the February 9, 2012 final amendments the Commodity Futures Trading Commission (CFTC) made to its Rule 4.5 exemption from commodity pool operator (CPO) registration for registered funds.

Design/methodology/approach

This article explains how amended Rule 4.5 will be applied to advisors and sub‐advisors of registered investment companies and the managers of foreign corporations controlled by registered investment companies. The article also describes the expected impact of the CPO compliance regime under a proposed harmonization of CFTC CPO regulation with Securities and Exchange Commission regulation of registered fund advisers.

Practical implications

All registered fund advisers should conduct a review of each of their registered funds' portfolios, investment strategies and marketing materials to evaluate their status as CPOs by the compliance deadline. Advisers who cannot comply with the amended Rule 4.5 by the compliance deadline should prepare for CPO registration.

Originality/value

The paper provides practical guidance from experienced financial services lawyers.

Citation

Shea, P.J., Moriarty, K.H., Rosenzweig, K.M., Sorady, M. and Xethalis, G.E. (2012), "All advisers to registered investment companies need to evaluate their exposure to CFTC regulation after recent rule amendment", Journal of Investment Compliance, Vol. 13 No. 2, pp. 20-24. https://doi.org/10.1108/15285811211238110