On August 13th, the CFTC adopted final rules concerning certain compliance obligations for commodity pool operators (“CPOs”) of investment companies registered under the Investment Company Act of 1940 (“RICs”) and amendments applicable to all registered CPOs and commodity trading advisors (“CTAs”).
In 2012, the CFTC narrowed the CPO exclusion available to CPOs of RICs under CFTC Reg. 4.5. In order to harmonize CFTC disclosure requirements with existing SEC requirements for RICs, the CFTC has now adopted a substituted compliance regime that would deem a CPO to be in compliance with CFTC Regs. 4.21, 4.22(a) and (b), 4.24, 4.25 and 4.26 if it satisfies all analogous SEC requirements. In order to claim this relief, applicable CPOs must—
- file a notice with NFA indicating that it is relying on the relief provided by CFTC Reg. 4.12 and its intent to comply with all applicable SEC requirements;
- file with NFA any SEC-required financial statements concerning the RIC;
- file a notice with NFA if the CPO intends to use a third-party service provider for recordkeeping purposes;
- make the RIC’s current net asset value per share available to participants;
- make SEC-required shareholder reports accessible on a website maintained by the CPO or its designee or otherwise make such reports available to participants and the means through which the information will be made available;
- include a reference to the CFTC in the “Standard Cautionary Statement” required by CFTC Reg. 4.24 and Rule 481 of the Securities Act of 1933; and
- for CPOs with less than 3 years of operating history, disclose the performance of all CPO-managed accounts and pools that have investment objective, policies, and strategies substantially similar to those of the applicable RIC.
The amended reporting rules under CFTC Reg. 4.22 become effective upon publication in the Federal Register, and the rules providing relief from CFTC Regs. 4.21, 4.24, 4.25 and 4.26 become effective 30 days after publication in the Federal Register. For new RICs, compliance begins upon filing an initial registration statement. For existing open-end RICs, compliance begins upon filing of the first post-effective annual update to the registration statement. For closed-end RICs, compliance begins upon updating the registration statement. Further, CPOs of RICs must comply with Form CPO-PQR reporting requirements 60 days after publication in the Federal Register.
The CFTC has also rescinded the requirement that CPOs obtain a signed acknowledgement of receipt of the commodity pool disclosure document, which becomes effective upon publication in the Federal Register.
Finally, the CFTC adopted amendments requiring all CPOs and CTAs to update their disclosure documents on an annual basis rather than every 9 months. All CPOs will be allowed to use third-party service providers to maintain their books and records, provided that they file a notice with NFA. These amendments will become effective 30 days after publication in the Federal Register. The pre-publication version of the final rules is available here.