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NFA Issues Guidance to CPOs Regarding Exemptions Under Regulation 4.13(a)(4)

Posted in CFTC Compliance

As we previously reported, the CFTC issued new regulations eliminating the exemption from registration available to CPOs that offered funds solely to sophisticated investors pursuant to Regulation 4.13(a)(4).  For more information on this new CFTC regulation, click here.  Earlier today, the NFA issued a notice to members to provide guidance to CPOs who operate pursuant to Regulation 4.13(a)(4).  After December 31, 2012, all member CPOs operating pursuant to Regulation 4.13(a)(4) must register with CFTC or file an exemption under a different regulation.

A CPO that does not qualify for the de minimus exemption under Regulation 4.13(a)(3) (pools that have less than 15 participants and aggregate capital contributions do not exceed $400,000) may be eligible for other exemptions.  Specifically, a CPO could file an exemption under Regulations 4.7, 4.12 or CFTC Advisory Rule 18-96.  Regulation 4.7 exempts CPOs from certain regulatory requirements where the pool participants are all qualified eligible persons.  Regulation 4.12 exempts CPOs from certain regulatory requirements if less than 10% of the pool’s assets are invested in futures or if the pool is a commodity ETF.  CFTC Advisory Rule 18-96 provides relief from certain regulatory requirements to CPOs that operate offshore commodity pools.

To assist CPOs in withdrawing a 4.13(a)(4) exemption and claiming another exemption, the NFA will modify its electronic exemption system and allow CPOs to pre-file for an exemption that would become effective on January 1, 2013.  Any CPO that does not pre-file for a new exemption and withdraws its 4.13(a)(4) exemption will become subject to CFTC and NFA regulatory requirements for 2012.  Any CPO that wishes to withdraw an exemption may do so by accessing the NFA’s electronic exemption system here