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CFTC provides new guidance for delegating CPOs

Certain commodity pool operators (delegating CPOs) delegating investment management authority to registered CPOs (designated CPOs) will be able to request relief from CPO registration using a new “standardized, streamlined approach”.

The Division of Swap Dealer and Intermediary Oversight (DSIO) of the US Commodity Futures Trading Commission (CFTC) has issued a letter which does not in and of itself provide CPOs with registration relief.
Instead, the letter sets out the steps a delegating CPO meeting the criteria in the letter should use to request expedited relief from CPO registration.
Cordium notes that the criteria generally track requirements set out in a series of no-action relief letters issued in the past to particular delegating CPOs and that the requirements go beyond those set out in an August 2012 FAQ. 

The regulatory update impacts registered CPOs (or entities considering CPO registration) that fall under the following categories (among others), and action may be required:
                •             Registered CPOs (or entities considering CPO registration) that operate offshore (non-US) investment funds, where the members of the boards of directors of such investment funds are not registered CPOs;
                •             Registered CPOs (or entities considering CPO registration) that operate investment funds formed as limited partnerships, where each general partner of such limited partnerships is not a registered CPO; and
                •             Registered CPOs (or entities considering CPO registration) that operate investment funds formed as limited liability companies, where the managing members of such investment funds are not registered CPOs.
It is recommended that unregistered CPOs who may be delegating investment management authority, or are considering doing so, review this regulatory update and the letter with counsel to determine if they should submit requests for relief using the new approach.
Firms whose pools have board members are urged to reach out to counsel and carefully review the letter’s approach to such board members.
Cordium notes that the NFA may be proactive in contacting registered CPOs and informing them of the new guidance, where it appears that there are delegating CPOs (including members of boards) that have not registered or received relief from registration.
Delegating CPOs that do not meet the criteria should note that DSIO will continue to consider their requests for CPO registration relief. Delegating CPOs that have received registration relief in the past may continue to operate under the relief letters they received and do not need to resubmit requests, provided they continue to meet the conditions of the granted relief. 

The letter’s approach is intended to facilitate DSIO’s more efficient and expedited consideration of the “numerous pending and expected” requests for relief from delegating CPOs who meet the criteria. To simplify the process, DSIO has provided a template for the request and its required exhibits in an attachment to the letter. 
DSIO will issue individual responses to each request. The CFTC has already posted a letter granting no-action relief to a delegating CPO that requested the relief in accordance with the streamlined approach described in the letter.

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