On September 9, 2014, the Commodity Futures Trading Commission (CFTC) issued an exemptive letter (No. 14-116) that permits a commodity pool operator (CPO) relying on an exemption under CFTC Regulation 4.7(b) or 4.13(a)(3) to engage in general solicitation or general advertising under certain circumstances, as permitted under recent amendments to Rule 506(c) of SEC Regulation D implementing the Jumpstart Our Business Startups Act (JOBS Act).

Background

CFTC Regulation 4.13(a)(3) provides an exemption from CPO registration with respect to a fund if the fund only engages in limited trading of commodity interests (generally, if the aggregate net notional value of all commodity interests is less than 100% of the fund's net assets, or if the aggregate margin and premiums for commodity interests is less than 5% of the fund's net assets). However, the exemption under Regulation 4.13(a)(3) is only available if the interests in the fund are "offered and sold without marketing to the public in the United States." 

Regulation 4.7(b) provides relief from certain requirements otherwise applicable to a registered CPO with respect to a fund if interests in the fund are offered and sold only to qualified eligible persons (QEPs). However, the exemption under Regulation 4.7(b) is only available if the interests in the fund are "offered or sold without marketing to the public." 

Rule 506(c) recently adopted by the SEC permits an issuer to engage in general solicitation or general advertising under certain circumstances. However, any fund relying on the exemption under Rule 506(c) to engage in general solicitation or general advertising would not, as discussed above, have been able to rely on the exemption under Regulation 4.13(a)(3) or 4.7(b).

Criteria for Relief

The new letter grants exemptive relief, in certain circumstances, from the requirements of Regulations 4.7(b) and 4.13(a)(3) that are incompatible with reliance on Rule 506(c). In order to take advantage of the relief offered under the letter, a CPO claiming relief must file a notice with the CFTC that includes certain basic information regarding the CPO, the pool(s) for which relief is being sought, and the exemption upon which the CPO is relying.