On March 8, the Supreme Court declined to hear an appeal of a decision of the Third Circuit Court of Appeals to the effect that the manager of a feeder fund investing in a master fund that trades futures was a commodity pool operator (CPO) under Section 1(a)(5) of the Commodity Exchange Act (CEA).

Defendant was the manager of a feeder fund, and solicited investors for the feeder fund, which then invested in master fund entities that were actively engaged in trading futures contracts. Neither the manager nor the feeder fund was registered with the Commodity Futures Trading Commission. The manager argued that because the feeder fund was not itself engaged in trading futures, the feeder fund was not a “commodity pool” under the CEA and, therefore, that the manager was not a “commodity pool operator.” The Third Circuit Court of Appeals disagreed, ruling that an entity need not be actually engaged in the trading of futures contracts to be a “commodity pool” under the CEA, but instead need only be “engaged in a business in the nature of an investment trust, syndicate, or similar form of enterprise” that solicits, accepts or receives funds for the purpose of futures trading.

The opinion of the Third Circuit Court of Appeals can be found here.

The Supreme Court’s denial of certiorari can be found here.