NFA Filing Requirements for Certain CPOs Pursuant to CFTC's Harmonization Rules

The CFTC has adopted final rules for the harmonization of certain compliance and disclosure requirements for CPOs of investment companies (RICs) registered pursuant to the Investment Company Act of 1940.  Previously, most such CPOs were exempt from registration pursuant to CFTC Rule 4.5.

The final rules adopted by the CFTC permit a CPO of a RIC to comply with the CFTC Part 4 disclosure requirements through substituted compliance with certain SEC rules.  Additionally, CPOs of RICs may keep their books and records concerning the RIC at a third party's location such at the RIC's administrator.  CPOs of RICs seeking to keep its books and records at a third party's location must file a notice of exemption with the NFA.  A separate notice must be filed for each respective RIC managed by the CPO.

NFA Amends NFA Rule 2-45 and Interpretive Notice Concering Loans by Commodity Pools to CPOs and Their Affiliates

Generally, NFA Rule 2-45 prohibits commodity pools from making loans or advancements to their CPOs or its affiliates.  Effective September 13, 2013, NFA amended NFA Rule 2-45 and Interpretive Notice 9062 to acknowledge the permissibility of certain securities-related transactions, which may be entered into by RICs and certain other commodity pools as a result of investment strategies done in the ordinary course of business.

The amendments were the result of comments from certain CPOs who regularly engage in securities transactions on behalf of pools which are also RICs.  Prior to the CFTC's amendment of CFTC Rule 4.5, these managers were exempt from registration as CPOs.  Although explained in greater detail in the amended NFA Interpretive Notice ¶9062, NFA Rule 2-45 now permits for certain commodity pools (including RICs), certain securities-related transactions including securities borrowings/securities loans, guarantees of affiliates, securities loans for cash financing, repurchase agreements, reverse repurchase agreements, tax-related distributions and other transactions otherwise permitted by the Investment Company Act of 1940 and the SEC.

SEC Requests Additional Comments Concerning Proposed Amendments to Reg. D Under JOBS Act

The SEC re-opened the comment period concerning amendments to Reg. D, which were proposed as part of implementation of the JOBS Act.  Since September 23, 2013, issuers have been permitted to engage in general solicitation under the JOBS Act.  At the same time, the SEC is in the process of implementing rules which govern offerings utilizing general solicitation and made in reliance of newly adopted Rule 506(c).

Specifically, the proposed amendments would modify Reg. D to require an issuer to: (1) file a Form D prior to engaging in general solicitation, (2) file an amended Form D notifying the SEC of the closing of any offering, (3) include certain written disclosures and legends on any written material used in general solicitations and (4) file with the SEC, on a temporary basis for two years following passage of the amendments, any written material used in connection with a general solicitation.  The proposed amendments also disqualify an issuer from relying upon Rule 506 for one year if the issuer or its affiliates did not comply with the Form D filing requirements at any time in the prior five years.  Amendments were also proposed for the Form D, which would require an issuer to include information concerning past offerings in any Form D filing.  Finally, amendments to Rule 156 would ensure that anti-fraud provisions were also applicable to any sales literature distributed in connection with any private offering.   From September 27, 2013 through November 4, 2013, almost 40 additional comments were submitted concerning the proposed amendments, which presumably the SEC will consider before adopting final rules.