Between Bridges by Gary DeWaal (May 13, 2014): CFTC Implements Streamlined Way for Certain CPOs to Apply for Registration Relief

Jump to: Between Bridges    Managed Money    My View    News Developments   
Email Print
Published Date: May 13, 2014

The Commodity Futures Trading Commission yesterday introduced a simplified way for certain commodity pool operators to apply for registration exemptions.

In the past, certain CPOs that delegated investment management authority (delegator CPO) over a commodity pool to another affiliated CPO (designated CPO) were able to apply for a waiver of CFTC CPO registration requirements. To do so, the delegator CPO and the proposed delegation arrangement had to meet certain criteria; if they did, these no action requests generally were granted. However, this process required submission of a full request for no action relief to the CFTC’s Division of Swap Dealer and Intermediary Oversight that conformed to general CFTC requirements pertaining to no action requests. (For details regarding the general process to request no action and other exemptive relief from the CFTC, click here.)

Under the new streamlined process approved by the Division, qualified CPOs requesting registration relief are simply obligated to file a specially designed form of letter that contains certain basic information about both the delegator and designated CPOs. In the letter the delegator CPO confirms that the applicable criteria for the relief has been met. Both the designated and delegator CPOs must also execute forms of certification that must accompany the request.

For the delegating CPO to obtain the relief, the following criteria must be met: 

  1. the delegating and designated CPOs have a legally binding agreement whereby the delegating CPO’s delegates all its investment management authority to the designated CPO regarding the relevant commodity pool;
  2. the delegating CPO will not participate in the solicitation of investors in the commodity pool nor manage any of its property;
  3. the designated CPO is registered as a CPO and the delegating CPO must not be subject to a statutory disqualification;
  4. there is a business reason for the designated CPO to be a separate entity from the delegating CPO (i.e., not just so the delegating CPO can avoid registration);
  5. the books and records of the delegating CPO are maintained by the designated CPO; and
  6. if the delegating and designated CPOs are each non-natural persons, then one CPO controls, is controlled by or is under common control with the other.

In most circumstances the delegating and designated CPO must also agree to joint and several liability in connection with the operation of the commodity pool. However, this is not necessary when the delegating CPO is an unaffiliated board member of the relevant commodity pool and is subject to liability as a board member under the laws of the jurisdiction where the commodity pool is set up.

In general, anyone who is engaged in a business that is of the nature of a commodity pool and solicits and handles funds from US customers to trade futures, related options, security futures or swaps on a collective basis must register as a CPO under CFTC rules. A registered CPO must also be a member of the National Futures Association.

My View. It is time for the CFTC to update it April 1999 Advisory regarding Exemptive, No Action and Interpretative Letters (for a version of this advisory, click here). Given the financial austerity which cripples the agency, at a minimum, third parties with identical or nearly identical fact patterns should be permitted to rely on published no action letters. Currently only the submitter of such a request can rely on it. This current initiative by the Division of Swap Dealer and Intermediary oversight is an important first step in such a process. Moreover, as I have written before, the CFTC should consider revising its 2007 enforcement advisory entitled “Cooperation Factors in Division Sanction Recommendations” to offer potential respondents an opportunity early on to settle certain types of offenses (e.g. where there has been no customer harm, fraud or manipulation) on an expedited basis before the expenditure of substantial time and resources by both CFTC staff and potential respondent(s). (For my prior views on this, see the article entitled “CFTC Fines Two Entities…Over Inadvertent Deficiencies in Their Handling of Customer Funds and Position Limit Violations,” in the March 31 version of Bridging the Week by clicking here).

For more details on this new CFTC process, click here:

The information in this article is for informational purposes only and is derived from sources believed to be reliable as of May 13, 2014.  No representation or warranty is made regarding the accuracy of any statement or information in this article.  Also, the information in this article is not intended as a substitute for legal counsel, and is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The impact of the law for any particular situation depends on a variety of factors; therefore, readers of this article should not act upon any information in the article without seeking professional legal counsel.  Katten Muchin Rosenman LLP and/or Gary DeWaal may represent one or more entities mentioned in this article. 

Circular 230 Disclosure: Pursuant to regulations governing practice before the Internal Revenue Service, any tax advice contained in this article is not intended or written to be used and cannot be used by a taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

Recent Commentaries




Gary DeWaal

Gary DeWaal is currently Special Counsel with Katten Muchin Rosenman LLP in its New York office focusing on financial services regulatory matters. He provides advisory services and assists with investigations and litigation.

Social Media:


Katten is a firm of first choice for clients seeking sophisticated, high-value legal services in the United States and abroad.

Our nationally recognized practices include corporate, financial services, litigation, real estate, environmental, commercial finance, insolvency and restructuring, intellectual property, and trusts and estates.

Our approximately 650 attorneys serve public and private companies, including nearly half of the Fortune 100, as well as a number of government and nonprofit organizations and individuals.

We provide full-service legal advice from locations across the United States and in London and Shanghai.


Gary DeWaal
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022-2585


Request Information »

Join Mailing List »