In recently submitted comments, SIFMA Asset Management Group ("SIFMA AMG") and the National Futures Association ("NFA") urged the CFTC to amend its proposal to simplify regulatory obligations for commodity pool operators ("CPOs") and commodity trading advisors ("CTAs") in the CFTC Part 4 regulations. The comment period ended on December 17, 2018.

As previously covered, the CFTC proposed (i) registration exemptions for CPOs that solicit and/or accept funds from only non-U.S. persons for participation in offshore commodity pools, (ii) allowing the U.S.-based CPO of an offshore commodity pool with U.S. participants to maintain the commodity pool's original books and records at the offshore location of the pool, (iii) CPO and CTA registration exemptions for qualifying family offices, (iv) prohibiting persons statutorily disqualified from registration as CPOs from claiming or affirming CPO registration exemptions, (v) amendments permitting general solicitation by CPOs, (vi) providing exclusionary relief for business development companies, and (vii) streamlining amendments as to Forms CPO-PQR and CTA-PR.

SIFMA AMG stated that certain parts of the proposal would (i) increase regulatory burdens and "uncertainty" and (ii) have a disproportionately negative effect on "offshore activities involving non-U.S. investors and private funds engaging only in de minimis commodity interest trading." SIFMA AMG advised the CFTC to mitigate these effects by, among other things:

  • making the conditions of the proposed " 18-96 Exemption" less stringent (i.e., "workable in practice and more consistent with the [CFTC's] level of regulatory interest");
  • adopting and sharing guidance on how CFTC Rule 3.10(c)(3)(i) will interact with the proposed 18-96 Exemption;
  • studying whether the proposal's investor protection concerns regarding fraudulent conduct in the operation of exempt pools necessitate the proposed statutory disqualification prohibition;
  • clarifying the conduct and disclosure exemption mechanism described in the proposed statutory disqualification prohibition; and
  • creating a principles-based definition of the term "commodity pool" in the context of the proposed family office CPO exemption.

The NFA raises concerns over the process for claiming exceptions to the proposed statutory disqualification prohibition. The NFA recommended that the proposed exception for the statutory disqualifications that were disclosed to the NFA at least 30 days prior to the claim of exemption be either eliminated or limited to persons currently registered. The NFA also requested clarifications with respect to certain proposals to codify existing CFTC staff no-action relief.

In addition, the Managed Funds Association requested that the CFTC clarify certain provisions of proposed rules (see previous coverage).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.