On February 9, 2012, the Commodity Futures Trading Commission (“CFTC”) significantly overhauled several of its rules relating to commodity pool operators (“CPOs”), including amending CFTC Rule 4.5 and rescinding CFTC Rule 4.13(a)(4).The amended Rule 4.5 significantly limits the ability of advisers to registered investment companies (i.e., mutual funds) to rely on the rule’s exclusion from CFTC regulation, and will likely require many advisers to mutual funds that invest in commodity futures, commodity options and swaps to register as CPOs with the CFTC. Compliance with amendments to Rule 4.5 as set forth in CFTC Rule is required by the later of December 31, 2012 or within 60 days following the CFTC’s adoption of final rules defining the term “swap”. The rescission of CFTC Rule 4.13(a)(4) eliminates the CPO registration exemption typically used by advisers to private funds that are offered to highly sophisticated investors (commonly referred to as “qualified purchaser funds” or “3(c)(7) Funds”). An adviser who previously relied upon CFTC Rule 4.13(a)(4), will now either have to restrict its commodity interest trading to qualify for the de minimus exemption available under CFTC Rule 4.13(a)(3) or register as a CPO. Those who are required to register, may be able to qualify for Rule 4.7, which applies a less burdensome system of regulation to CPOs that advise funds offered only to “qualified eligible persons”, a term that includes “qualified purchasers” eligible to invest in 3(c)(7) Funds. Advisers that have relied upon the CFTC Rule 4.13(a)(4) registration exemption prior to the effective date of the amendments (likely to be in April 2012) will have until December 31, 2012 to register as a CPO or qualify for another exemption from registration. The compliance date for all other advisers will be the effective date of the amendments. The CFTC Rule is available here.
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