The CFTC finalized amendments involving guidelines for registration and compliance for commodity pool operators (“CPO”) and commodity trading advisors (“CTA”). The rule will require CPOs and CTAs to submit reports accounting for amount of assets in their pools and their use of capital. They will also describe counterpart risk, and trading and investment positions for each pool. The CFTC intends the amendments to increase transparency of futures and swaps markets and increase consumer protection.
Previously, operators were exempted from registering their CPOs if the operator only combined funds from qualified eligible persons (“QEP”) or accredited investors. Under the new rule, these operators are no longer exempt from registering pools comprised of funds from qualified eligible persons. Notices claiming exemption must now be annually filed with the CEA, and swap transactions must include disclosure documents describing certain risks.
The new reporting requirements will become effective on July 2, 2012. The CFTC approved the amendments by a 4-1 vote.
Additionally, the CFTC proposed a rule that would reduce compliance burdens on registered investment advisors (“RIAs”). Under the Investment Company Act of 1940, RIAs are registered with a state’s securities agency or the Securities and Exchange Commission (“SEC”), and are authorized to advise on securities. Under the amendments, RIAs are now required to register with both the SEC and with the CFTC as CPOs. Due to this cross-registration, RIAs may be subject to duplicate and potentially conflicting disclosure and reporting requirements. The proposed rule would synthesize CFTC and SEC requirements, and would therefore minimize RIA compliance burdens.
