This evening the Division of Swap Dealer and Intermediary Oversight (“DSIO”) of the Commodity Futures Trading Commission (“CFTC”) issued a letter which provides exemptive relief from certain specified provisions of Regulations 4.7 and 4.13(a)(3) to commodity pool operators (each, a “CPO”), consistent with the JOBS Act amendments to Securities and Exchange Commission (“SEC”) Regulation D adding Rule 506(c) and revising Rule 144A. See CFTC Letter No. 14-116 (September 9, 2014) (the “Letter”).1 Effectively, the Letter will permit private funds that engage in commodity interest trading and resellers of securities of issuers that engage in commodity interest trading to engage in general solicitations pursuant
to Rules 506(c) and 144A.
The Letter explains that the recent SEC amendments adding Rule 506(c) to Regulation D and revising Rule 144A(d)(1) create a situation in which certain CPOs of issuers of securities may not currently rely upon Regulations 4.7(b) or 4.13(a)(3) with respect to the issuer’s offerings because the conditions of these CFTC Regulations include, among other things, prohibitions against marketing to the public. Based upon these SEC amendments, DSIO concluded that it is appropriate to grant exemptive relief from the Regulation 4.7(b) requirements that an offering be exempt pursuant to section 4(a)(2) of the Securities Act of 1933 and be offered solely to “qualified eligible persons,” as defined thereunder, and from the requirement in Regulation 4.13(a)(3)(i) that securities be “offered and sold without marketing to the public.”
The relief is not self-executing, and CPOs wishing to claim the exemptive relief must file a notice with DSIO. A claim submitted by a CPO will be effective upon filing, so long as the claim is materially complete and accurate. Among other things, a notice must include basic information on the entities that are claiming exemptive relief and a representation that the conditions of Regulation 4.7 or 4.13(a)(3) are satisfied, other than the requirements noted above. The relief will remain in effect until the CFTC takes final action on any JOBS Act-related amendments to the Part 4 Rules.
James S. Matteucci