September 25, 2012
Previously published on Fall 2012
On August 14, 2012, the Commodity Futures Trading Commission (CFTC) issued responses to a number of frequently asked questions prompted by recent amendments to CFTC rules (see our recent client alerts: CFTC Repeals 4.13(a)(4) Exemption Used by Many Private Fund Managers and CFTC and SEC Adopt Final Rules Defining Swaps). Among the guidance provided in the FAQ, the CFTC confirmed that: - a general partner or managing member of a commodity pool can avoid registration as a commodity pool operator (CPO) if it properly delegates relevant obligations to a registered CPO;
- a fund planning to operate under the limited trading exemption under Rule 4.13(a)(3) may enter into swaps before making other investments, and will have a “reasonable time” to come into compliance with the trading limits under the Rule;
- the CFTC staff is working with the National Futures Association to permit managers to apply to register with the CFTC prior to the end of 2012, but have the effective date of the registration delayed until January 1, 2013;
- a fund operated under the Rule 4.13(a)(3) limited trading exemption need only ensure compliance with the trading limits each time a new position is established, and will not need to otherwise reconfigure its portfolio to fit within the limits; and
- a fund-of-funds may continue to rely on guidance in Appendix A under Rule 4.13(a)(3) (even though the Appendix is not currently available on the CFTC’s web site) as to how to apply the Rule 4.13(a)(3) limits in a fund-of-funds context until the CFTC issues further guidance (see further discussion in Many Funds-of-Funds Need To Take Urgent Action To Avoid CFTC Registration above).
The CFTC staff also recently issued an interpretive letter permitting newly formed funds to rely on Rule 4.13(a)(4) until the end of 2012.
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