The Commodity Futures Trading Commission (CFTC) issued a no-action letter (CFTC Letter No. 12-68) on December 21, 2012, stating that it will not take enforcement action against commodity pool operators (CPOs) or commodity trading advisors (CTAs) who fail to become registered before December 31, 2012; provided that they have submitted all of the paperwork that is necessary for registration.1

Many CPOs who were previously exempt from registration are now required to register with the CFTC as a result of the rescission of CFTC Rule 4.13(a)(4), which provided an exemption from registration for CPOs of commodity pools which were only marketed to certain categories of sophisticated investors. The deadline for registration is December 31, 2012. The Investment Company Institute requested the no-action relief out of concern that the National Futures Association, which is responsible for processing registrations, would not be able to cope with the flood of last-minute applications. 

In its no-action letter, the CFTC stated that it will not take enforcement action against a CPO who is not fully registered as of December 31, 2012, provided that (1) the CPO submits its application for registration and associated paperwork to the NFA on or before December 31, and (2) on and after January 1, the CPO complies with the CFTC's regulations as if it were registered.

The registration requirement described above does not apply to CPOs who qualify for another exemption from registration, such as the "de minimis" exemption under CFTC Rule 4.13(a)(3), and have made the filings necessary to claim the exemption prior to December 31, 2012. If you operate a fund or other investment vehicle that invests in derivatives (other than certain FX and security-based derivatives), you should determine whether you qualify for an exemption from registration as a CPO if you have not already done so. If you do not qualify for an exemption, you are required to file an application for registration with the NFA prior to December 31, 2012.

Footnotes

1 This e-communication focuses on the modifications to the regulation affecting private fund advisers. However, the no-action relief also extends to advisers who are now required to register with the CFTC due to the amendment of Regulation 4.5, which concerns advisers to funds registered under the Investment Company Act of 1940.

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.