CFTC No-Action Reinstates Broad Registration Exemption for Institutional CPOs, Pending Further Action

On Friday, December 19, the Staff of the Commodity Futures Trading Commission’s (CFTC) Markets Participant Division published a new no-action letter – CFTC Staff Letter 25-50 – which creates an exemption from commodity pool operator (CPO) registration for operators of privately-offered pools owned solely by “qualified eligible persons” (QEPs), as defined in CFTC rules.  In particular, this exemption is available to CPOs who are registered as investment advisers with the Securities and Exchange Commission (SEC), with respect to qualifying commodity pools that are reported in the adviser’s Form PF filings to the SEC. 

This relief, which was granted in response to a request from the Managed Funds Association, largely parallels the exemption previously codified in CFTC Rule 4.13(a)(4) and rescinded by the CFTC at the end of 2012.  Under the terms of the no-action letter, this relief remains available until the CFTC either codifies the exemption in its regulations or publicly announces its intention not to do so.  Firms seeking to rely upon the new relief set out in the no-action letter – whether currently registered with the CFTC or exempt from registration on another basis – must submit an email notice to CFTC staff, pursuant to instructions set out in the letter, and provide disclosure to pool participants regarding the CPO’s reliance on such relief.  

Registered CPOs who withdraw their registration in reliance upon this exemption are not required to offer their pool participants a right of redemption (as would otherwise be required by CFTC Rule 4.13(e)(2)); however, the letter does not expressly address other transition considerations that may apply to such firms (for example, with respect to periodic and annual reporting requirements for Q4 2025).  We will continue to monitor for additional guidance regarding this transition process as it becomes available.