CFTC proposed to amend Regulation 4.7 (17 CFR 4.7) on CPO compliance exemptions.
Aims to update various aspects of Reg 4.7 to modernize rule and reflect current use.
Commissioner Pham and Johnson issued statements in support of proposed revisions.
Mersinger dissented, unable to support proposal to narrow the scope of exemptions.
Background
Number of CPOs and CTAs operating pursuant to Reg. 4.7 and offering their pools and trading programs to Qualified eligible persons (QEPs) is a popular registration status.
Commission observed that the number of CPOs and CTAs relying upon Regulation 4.7 significantly outnumbers the number of CPOs and CTAs fully registered with the CFTC.
Rule Provisions
Increased portfolio requirement monetary thresholds to account for effects of inflation.
New disclosure requirements for CPOs and CTAs operating pools and trading programs.
Codified routinely issued exemptive letter relief that allows CPOs of funds of funds operated to choose to distribute monthly statements within 45 days of month-end.
Consultation
Comments must be submitted within 60 days of publication in the federal register.
Oct. 12, 2023 Fed Reg Proposal
On Oct. 12, 2023, CFTC published the proposed amendments in the federal register.
The deadline for the receipt of comments on the proposal was set as Dec. 11, 2023.
Dec. 2023 SIFMA Comment Letter
On Dec. 11, 2023, SIFMA issued comment letter on proposed Reg 4.7 amendments.
Opposed prescriptive disclosure mandate as unsupported by cost-benefit analysis.
Encouraged CFTC to decline to adopt proposal to require retail type disclosures to be provided to sophisticated prospective investors in Rule 4.7 operated pools, accounts.
If proposal is adopted, CFTC should allow for at least an 18-month compliance period.
To allow CPOs and CTAs adequate time to develop the necessary compliance programs.
Sep. 12, 2024 CFTC Final Rule
On Sep. 12, 2024, CFTC approved final rule on exemptions from certain compliance requirements for CPOs and CTAs regarding offerings to qualified eligible persons (QEP).
Commissioners Mersinger and Pham issued statements of support for the final rule.
The final rule will be effective 60 days after publication in the federal register.
CPOs and CTAs must comply with the increased Portfolio Requirement thresholds in Regulation 4.7(a) by six months after the rule's publication in the federal register.
Sep. 26, 2024 CFTC Fed Reg Final Rule
On Sep. 26, 2024, CFTC published final rule in federal register, effective Nov. 25, 2024
CPOs, CTAs must comply with increased portfolio requirement threshold Mar. 26, 2025.
Optional monthly account statement reporting schedule for certain § 4.7 pools is available to CPOs as of effective date, compliance required upon election of schedule.
