On September 9, 2014, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) issued CFTC Letter No. 14-116 (Letter 14-116). Letter 14-116 grants exemptive relief from specific provisions of CFTC Rules 4.7(b) and 4.13(a)(3) to commodity pool operators (CPOs) to be consistent with the Jumpstart Our Business Startups (JOBS) Act's amendments to the Securities and Exchange Commission (SEC) Regulation D adding Rule 506(c) and revising Rule 144A under the Securities Act of 1933, as amended (Securities Act). Rule 506(c), as amended pursuant to the JOBS Act, permits issuers to engage in general solicitation and general advertising as long as certain conditions are satisfied. Prior to the issuance of Letter 14-116, CFTC rules generally prevented certain private funds from relying on amended Rule 506.
Letter 14-116 provides relief from the CFTC Rule 4.7(b) requirement that an offering be exempt pursuant to section 4(a)(2) of the Securities Act and be offered solely to qualified eligible persons (QEPs). Letter 14-116 also provides relief from the requirement of CFTC Rule 4.13(a)(3)(i) that securities be "offered and sold without marketing to the public."
To be eligible for the relief, the following requirements must be satisfied:
- the CPO must be relying on the Rule 506(c) exemption or be a CPO using a Rule 144A reseller; and
- the CPO must be relying on either CFTC Rule 4.7 or 4.13(a)(3).
The relief is not self-executing. A notice of claim must be filed in the form described below:
- state the name, business address and main business telephone number of the CPO claiming the relief;
- state the name of the pool(s) for which the claim is being filed;
- state whether the CPO claiming relief is a Rule 506(c) issuer or is using one or more Rule 144A resellers;
- specify whether the CPO intends to rely on the exemptive relief pursuant to Rule 4.7(b) or 4.13(a)(3), with respect to the listed pool(s);
- if relying on Rule 4.7(b), represent that the CPO meets the conditions of the exemption, other than that provision's requirements that the offering be exempt pursuant to section 4(a)(2) of the Securities Act and be offered solely to QEPs, such that the CPO meets the remaining conditions and is still required to sell the participations of its pool(s) to QEPs;
- if relying on Rule 4.13(a)(3), represent that the CPO meets the conditions of the exemption, other than that provision's prohibition against marketing to the public;
- be signed by the CPO, which may be accomplished by attaching a portable document format (PDF) file with a signature of the CPO; and
- be filed with the DSIO via e-mail using the e-mail address of email@example.com with the subject line "JOBS Act Marketing Relief."
Once obtained, the relief will not expire absent any final CFTC action in consideration of the JOBS Act and the SEC's regulatory amendments.
A link to Letter 14-116 can be found here.