On October 15, 2014, the Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealer and Intermediary Oversight (“DSIO”) announced that it is providing self-executing no-action relief for certain Commodity Pool Operators (“CPOs”) who delegate certain specified activities to a registered CPO and meet the conditions set forth therein. The relief made available in Letter 14-1261 supersedes the registration no-action position DSIO previously made available in Letter 14-692, except that CPOs who obtained relief under Letter 14-69 may continue to rely on it. However, unlike Letter 14-69, which required each Delegating CPO to request registration no-action relief from DSIO, this new letter provides self-executing relief to Delegating CPOs who meet the specified criteria for relief (i.e., no filing is necessary if the CPO meets the conditions). In this regard, with the exception of certain clarifications to the criteria in Letter 14-69, the criteria and conditions set forth in Letter 14-126 are, in purpose and effect, essentially the same as those set forth in Letter 14-69. Note that the CFTC staff will no longer consider pending requests for no-action relief under Letter 14-69.

DSIO acknowledges that certain circumstances involving CPO delegation situations may warrant no- action relief but might not conform to the criteria for this self-executing relief – accordingly, DSIO will continue to review requests for CPO registration no-action relief from persons who are unable to satisfy the criteria outlined below.


Section 1a(11)(A)(i) of the CEA defines the term “commodity pool operator” to mean any person:

  1. engaged in a business that is of the nature of a commodity pool, investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in commodity interests, including any: 
    1. commodity for future delivery, security futures product, or swap;
    2. agreement, contract, or transaction described in section 2(c)(2)(C)(i) of this title or section 2(c)(2)(D)(i) of this title; 
    3. commodity option authorized under section 6c of this title; or 
    4. leverage transaction authorized under section 23 of this title3

Under Section 4m(1) of the CEA, it is unlawful for any person who is a CPO to “make use of the mails or any means or instrumentality of interstate commerce in connection with [its] business as such…[CPO]” unless such person is registered under the CEA as a CPO4 or is exempt from such registration.

For a number of years, the CFTC staff has been reviewing requests from, and often granting no-action relief to, CPOs under circumstances where (i) such CPOs (“Delegating CPOs”) have delegated investment management authority of a commodity pool to another person that is registered as a CPO (“Designated CPO”) and (ii) the Delegating CPO does not engage in the solicitation of participants for, or the management of property of, the applicable commodity pool. In Letter 14-69, DSIO noted that many of those requests for relief contained similar fact patterns and DSIO therefore established a streamlined approach by which CPOs were able to request expedited no-action relief by utilizing a template form of no-action request letter. However, following the issuance of Letter 14-69, DSIO received a large number of requests for CPO registration no-action relief and in light of the administrative burdens imposed on its limited resources, DSIO determined to issue Letter 14-126, which provides for self-executing relief.

Applicable Criteria That Must Be Satisfied For Self-Executing Relief

The following criteria (the “Criteria”) must be satisfied to qualify for self-executing CPO registration no- action relief:

    1. Pursuant to a legally binding document5, the Delegating CPO has delegated to the Designated CPO all of its investment management authority with respect to the commodity pool. Letter 14-126 clarifies that the Delegating CPO may appoint one or more investment managers for the pool and still satisfy this criterion, provided that each such investment manager is registered as a commodity trading advisor (“CTA”) or is exempt from such registration;
    2. The Delegating CPO does not participate in the solicitation of participants for the commodity pool. Letter 14-126 clarifies that a Delegating CPO may be registered as an associated person (“AP”) of the Designated CPO or exempt from registration as such and may participate in the solicitation of pool participants solely in its capacity as an AP of the Designated CPO; and
    3. The Delegating CPO does not manage any property of the commodity pool. Letter 14-126 clarifies that a Delegating CPO may manage the property of the pool in its capacity as a principal or employee of the Designated CPO or of a CTA of the pool. However, management of pool property does not include responsibilities with respect to pool property of an administrative, clerical or ministerial nature. 
  2. The Designated CPO is registered as a CPO.
  3. The Delegating CPO is not subject to a Statutory Disqualification (see n. 4 supra).
  4. There is a business purpose for the Designated CPO being a separate entity from the Delegating CPO that is not solely to avoid registration by the Delegating CPO under the CEA and the Commission’s regulations.
  5. The books and records of the Delegating CPO with respect to the commodity pool are maintained by the Designated CPO. Letter 14-126 removes the requirement of an attestation to compliance with Rule 1.31, and instead simply requires that the books and records be maintained by the Designated CPO.
  6. If the Delegating CPO and the Designated CPO are each a non-natural person, then one such CPO controls, is controlled by, or is under common control with the other CPO.
  7. If a Delegating CPO is a non-natural person, then such Delegating CPO and the Designated CPO have executed a legally binding document whereby each undertakes to be jointly and severally liable for any violation of the CEA or the Commission’s regulations by the other in connection with the operation of the commodity pool.
  8. If a Delegating CPO is a natural person and is not an Unaffiliated Board Member6, then such Delegating CPO and the Designated CPO have executed a legally binding document whereby each  undertakes  to  be  jointly  and  severally  liable  for  any  violation  of  the  CEA  or  the Commission’s regulations by the other in connection with the operation of the commodity pool.
  9. If a Delegating CPO is an Unaffiliated Board Member, then such Delegating CPO must be subject to liability as a Board member in accordance with the laws under which the commodity pool is established.

There continue to be some issues related to satisfying certain of the Criteria, depending upon the particular facts and circumstances involved. For example, commodity pools that have a GP or managing member that is not affiliated with the Designated CPO would not be eligible for the self-executing relief. Additionally, directors of pools who are affiliated with or employed by material service providers to a Designated CPO or its affiliates might not be deemed “Unaffiliated Board Members” under the Criteria (see n. 6), thereby necessitating that the parties enter into a joint and several liability agreement before being able to rely upon the self-executing relief.


By providing self-executing CPO registration no-action relief, the CFTC staff is attempting to address the CPO delegation issue in a more efficient manner, particularly since relief may be applicable to multiple commodity pools and the staff has apparently been inundated with requests under the streamlined process set forth in Letter 14-69, as well as requests for clarification of certain of the Criteria. However, as noted, the Criteria that must be fulfilled in order to utilize the self-executing relief are not necessarily applicable to all CPOs and in all scenarios. Thus, certain CPOs may need to submit individual requests for no-action relief to DSIO or consider alternative fund structures.