CFTC Issues Revised No-Action Relief from CPO Registration for Certain CPOs
On 12 May 2014, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) issued Staff Letter 14-69 that introduced the “streamlined approach” in which certain Delegating Commodity Pool Operators (CPOs) could request no-action relief from registration with the CFTC as a CPO.
The relief is available under specific circumstances to persons/entities who have delegated responsibilities as a CPO of a commodity pool (Delegating CPO) to another registered CPO (Designated CPO). The 12 May 2014 Letter set out a “streamlined” approach and triggered a huge number of relief requests filed with the CFTC as well as numerous concerns regarding the relief application criteria.
On 15 October 2014, the DSIO issued Staff Letter 14-126 constituting “further progression” of the relief addressed in Staff Letter 14-69 – most notably that the relief will be self-executing (i.e. prior approval by filing a notice or claim is no longer required).
Under the new practice, delegating CPOs who already received no-action relief through the “streamlined” approach may continue to rely on the relief; however, going forward, the DSIO will no longer accept further requests nor act on pending streamlined relief requests.
Delegating CPOs still need to satisfy specific criteria to be eligible for no-action relief from the CPO registration requirement and the criteria for the relief are substantially the same to those listed in Staff Letter 14-69. However, the recent Letter adds some clarifications and changes relating to issues such as:
- Delegation of investment management authority to one or more third parties
- Delegating CPO participation in the solicitation of pool participants
- Management of property of the pool by the Delegating CPO
- Addressing the books and records requirements of the Delegating CPO
Registered CPOs should be aware that this new relief does not address all CPO delegation situations. It is therefore recommended that Registered CPOs assess their eligibility carefully to ascertain whether they fall within the conditions for the self-executing no-action relief that are contained in Staff Letter 14-126.