The CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter that provides exemptive relief until the CFTC takes action on JOBS Act related amendments to its Part 4 Rules. Access the letter here: http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-116.pdf
Since the SEC adopted final rules relaxing the ban on general solicitation in certain offerings made under Rule 506 and under Rule 144A, funds that are considered commodity pool operators (CPOs) as a result of their engaging in swaps activities and funds that relied on an exemption from CPO registration were left to wonder whether the CFTC would amend its regulations that currently prohibit marketing to the public.
For example, under Regulation 4.7 CPOs are relieved of certain reporting requirements provided that their securities are sold in a Section 4(a)(2) offering or in the case of banks registered as CPOs in connection with collective trust funds the securities of which are “offered or sold, without marketing to the public” to certain qualified investors. Without relief, an entity would not be able to rely on the provisions of Regulation 4.7 if it were to undertake a Rule 506(c) offering. Similarly, under the CFTC’s Regulation 4.13 (referred to as the de minimis exemption from CPO registration), an entity that claims the exemption must offer and sell interests without marketing to the public.
Therefore, the CFTC’s DSIO’s letter provides relief for CPOs that choose to use Rule 506(c) offerings or relying on Rule 144A resales. A CPO that claims exemptive relief must file a notice with the CFTC that includes certain basic information. The notice requirement is intended to permit the CFTC to verify compliance and to gain an understanding of the use of general solicitation by funds. The CFTC would still be required to amend its Part 4 Rules to effect a more permanent solution to reconcile its rules with the new reality of general solicitation.