CFTC Proposes to Streamline Regulations for Commodity Pool Operators and Commodity Trading Advisors


On October 9, the Commodity Futures Trading Commission (“CFTC“) unanimously approved proposed rules as a part of its KISS initiative to simplify regulations for commodity pool operators (“CPOs“) and commodity trading advisors (“CTAs“). The KISS initiative “requested public input on simplifying and modernizing the agency’s regulations to make them less burdensome and costly, while maintaining their regulatory benefits.”

In the Press Release announcing the proposal, the CFTC stated that the proposed rules “would simplify the regulatory obligations for CPOs and CTAs by codifying long-standing staff advisories and no-action letter relief in the Part 4 regulations.” Also, these rules would “ban individuals who are legally disqualified to operate investment pools from doing so” and streamline the registration requirements for CPOs that operate in multiple jurisdictions.

In their present form, the Part 4 regulations provide only limited, conditional regulatory relief for advisers to “commodity pools,” broadly defined to include private investment funds (i.e., funds that are not required to be registered under the Investment Company Act of 1940 (the “Company Act”)), including venture capital funds, private equity funds and hedge funds, if they hold any “commodity interest,” such as an interest rate swap.

It is particularly noteworthy that under the proposal, investment advisers of “business development companies” (as defined under the Company Act), would be “treated under the same terms” as investment advisers for investment companies registered thereunder.

The CFTC also stated that the proposed changes “would also help advance the CFTC’s ongoing effort to harmonize rules with comparable regulators by channeling Securities and Exchange Commission (“SEC“) regulations in providing registration relief to CPOs and CTAs whose clients are limited to a single family, and in aligning Part 4 regulations with amendments adopted by the SEC pursuant to the JOBS Act of 2012.”

Comments must be received on or before 60 days after the date of the publication of the proposed rulemaking in the Federal Register.